The Hang Seng Index ended the morning session down 0.44 percent at 20,610.64, with financials the biggest drag. The China Enterprises Index of top locally listed mainland companies fell 0.84 percent, underperforming Asian peers.

On the mainland, the Shanghai Composite Index fell 0.09 percent.

The Hang Seng Index shed 0.2 percent, while the China Enterprises Index of the top mainland listings in Hong Kong rose 0.2 percent as bourse turnover neared a 2-1/2-month low.— Chinese markets shut for a three-day public holidayMainland Chinese markets are shut for a three-day public holiday and will reopen on Thursday, while markets in Hong Kong will be closed on Wednesday and Friday.

Jetstar Hong Kong will begin flights in mid-2013, flying short-haul routes in China and to Japan, South Korea and southeast Asia.

Jetstar is made up of Jetstar Airways in Australia and New Zealand, Jetstar Asia in Singapore, Jetstar Pacific in Vietnam and Jetstar Japan, slated for launch in July 2012.

The Hang Seng Index slipped 202.56 points to 21,115.29 on turnover of HK$55.80 billion (US$7.10 billion).

Regional markets were restricted after disappointing U.S. consumer sentiment data as well as other figures showing virtually no inflationary pressure outside petrol, and weak industrial production.

“The market is listless… unless there is some exceptional good news, markets will continue to trade in a lacklustre (manner),” Peter Lai, director at DBS Vickers in Hong Kong said.

Turnover was low ahead of the release of Chinese banks’ earnings, said Ben Kwong, Chief Operating Officer of brokerage KGI.

Agricultural Bank of China, which is scheduled to report its 2011 results Thursday, fell 2.2 percent to HK$3.62, while China Construction Bank, which is due to issue results Friday, ended 1.8 percent lower at HK$6.16.

Aluminum Corp. of China Ltd. tumbled 4.2 percent to HK$3.89 after reporting a steep fall in its 2011 profits, while China Resources Power was down 2.8 percent at HK$14.80. But HSBC was up 1.07 percent at HK$70.80.

Chinese shares added 0.23 percent. The Shanghai Composite Index, which covers both A and B shares, was 5.44 points up at 2,410.18 on turnover of 103.0 billion yuan (US$16.3 billion).

However, traders remained quelled as they await some idea of the government’s plans for monetary policy, dealers said.

The Shanghai Composite Index, which covers both A and B shares, added 0.23 percent, or 5.44 points, to 2,410.18 on turnover of 103.0 billion yuan (US$16.3 billion).

“Investors will look for support from policies to boost liquidity, as well as improving sentiment overseas,” Zhang Gang, an analyst at China Central Securities, told Dow Jones Newswires.

China has cut the amount banks must keep in reserve twice since December last year and top officials say Beijing will “fine-tune” policy as the world’s number two economy slows.

Resources stocks led the market gains. Kingray New Materials, a manganese producer, surged by its 10 percent daily limit to 14.51 yuan. Rising Nonferrous jumped 8.56 percent to 69.40 yuan, while Baotou Steel Rare-Earth gained 4.26 percent to 71.91 yuan.

The telecom company’s gain outweighed weakness in consumer and railway-related stocks in Hong Kong.

The China Enterprises Index of the top mainland listings in Hong Kong lost 0.3 percent, while the Hang Seng Index rose 0.2 percent to 21,134.18 points.

It was stymied by 21,200, a level it briefly tested on Friday.Mainland Chinese markets were weaker, with the Shanghai Composite Index slipping 0.2 percent to 2,434.9, moving further below 2,440, technical resistance it tested on Friday.

The public anger over the conflict-of-interest allegations leveled against Chief Executive Donald Tsang and two of the candidates is a new development in Hong Kong, striking a nerve rooted in two greater fears, analysts say: that, nearly 15 years after this former British colony reverted to Chinese rule, a small circle of tycoons now runs top levels of government, and that the city’s tradition of rule of law may be giving way to how business and politics are conducted in mainland China.

“This may be the accepted practice in China, but it’s not permitted in Hong Kong,” Fung Chi-wood, an Anglican pastor and former legislator, said of reports that Mr. Tsang accepted favors from wealthy businessmen. Mr. Fung was among thousands of people who demonstrated last weekend against the influence of the rich in local government. “We are afraid our standards are becoming lower,” he said.

Doctored movie posters mocking chief executive hopeful Henry Tang are making the rounds on the Internet, poking fun at how the candidate’s underground expansion to his luxury home.

In one poster—among the many anonymously uploaded in recent days—Mr. Tang is shown beaming in a Harry Potter movie take-off below the caption: “Kowloon Basement and the Chamber of Secrets.”

Another shows his wife’s face super-imposed over that of an actor in “Resident Evil,” with the poster retitled, “Basement Evil: Apocalypse.”

Mr. Tang, son of a wealthy Shanghai industrialist, with close links to ex-Chinese president Jiang Zemin, was once thought to be the favored contender by Beijing, but public opinion is unraveling his candidacy.

Not that Hong Kongers have a vote in this election. Hong Kong’s future chief executive will be chosen by the city’s 1,200-member Election Committee—composed largely of business and political elites, many seen as strong Beijing backers. Universal suffrage is supposed to be realized in Hong Kong by 2017, but what that will look like is unclear.

The resulting sense of helplessness among Hong Kongers explains the latest spate of satire, says Prof. Joseph Cheng of the City University of Hong Kong. “It has been amply demonstrated that Beijing controls the whole election, and it’s disappointing for Hong Kong people that the candidates don’t engage in serious policy debate. So the feeling is that the latest is pretty good drama—let’s at least enjoy it. At least they can try and poke fun at the candidates.”

Local newspapers describe Mr. Tang’s 2,400 square-foot basement, allegedly built without government approval, as having a wine cellar, small theater and Japanese-style bath.

Mr. Tang, a wine collector known for cutting the wine tax to zero in the city during his time as the city’s financial secretary, said he knew about its construction Friday while his wife, Lisa Kuo, stood beside him.

News of the basement’s existence has fueled particular outrage in a city where tiny apartments are the norm and land is tightly controlled.

Recent additions of new posters uploaded to a Facebook page attracted more than 1,100 likes in a matter of hours. Before details of the luxurious construction were reported, Mr. Tang had described the basement as a “hole in the ground to store things in.”

Still, Mr. Tang is no stranger to unflattering caricatures. A poster of him with devil horns in the style of the “hope” poster used by U.S. President Barack Obama during his 2008 campaign appeared last year after he and other members of the current Donald Tsang administration were accused of resisting political reform.

Mr. Tsang, Mr. Tang’s former boss, also was the target of barbed posters after he sparked controversy three years ago by playing down the legacy of the 1989 Tiananmen Square crackdown.

Mr. Tang’s latest comments have done little to help his candidacy, which also took a bruising in October when he admitted to an extramarital affair.

The city’s prominent English-language newspaper, the South China Morning Post, has called for Mr. Tang to quit the race. A University of Hong Kong opinion poll taken last week shows a majority of Hong Kongers feel the same way.

All nominations for chief-executive candidates must be presented by Feb. 29. With Mr. Tang’s fortunes sinking, Beijing faces a tough call: continue to back the selection of a highly unpopular candidate, or scramble in the coming week to propose a new name.

It was already known that, since the signing of the arrangement between the Mainland and Hong Kong for the avoidance of double taxation in 2006, a number of Hong Kong residents who work and stay on the Mainland for more than 183 days during a year of assessment, though having paid their income tax on the Mainland, also have to pay taxes in Hong Kong as they also stay for more than 60 days and exercise employment in Hong Kong.

Chan was able to provide the information that, according to surveys conducted during the period of July to September in 2008, 2009 and 2010 respectively, some 218,200, 196,500 and 175,100 Hong Kong residents had worked in the Mainland during the previous 12 months.

Almost 90% of them usually worked in the Guangdong Province while being employed in the Mainland. From July to September in 2010, for example, most of the residents were engaged in the manufacturing sector, import/export trade and wholesale sector.

The Hong Kong Inland Revenue Department (IRD) has disclosed that the number of claims made by taxpayers, who rendered services outside Hong Kong (including the Mainland) and have paid tax in other jurisdictions similar to the Hong Kong salaries tax, was 6,243 and 10,731 for 2009-10 and 2010-11, respectively.

However, Chan confirmed that the use of the 183-day threshold, to determine a person’s tax liabilities in the other contracting party, will remain. To compute the 183-day period, both the IRD and China’s State Administration of Taxation (SAT) follow the international norm by adopting the “days of physical presence” method.

Given that it is the international standard, whenever the IRD has raised with SAT the suggestion of relaxing the 183-day threshold, both parties, after discussions, consider that the 183-day threshold should not be changed.

The 29th Hong Kong International Jewellery Show runs from February 16 to 20 at the Hong Kong Convention and Exhibition Centre and positions itself not only as the largest event of its kind in Asia, but a way into the China market for international jewelers.

And like most other high-end industries in the world today, China is where it is all at.

In pure terms of demand, China knocked India off its perch as the world’s largest gold jewellery market in the third quarter of 2011 as its consumption rose 13 per cent, year on year to 131 tonnes.

And demand is predicted to increase in 2012 — as the Chinese Year of the Dragon is considered a particularly auspicious time to hand out gifts, a fact reflected by the China Daily newspaper’s report this week that sales of gold, silver and jewelry over the recent Chinese New Year holiday had risen 57.6 per cent.

Hence this year’s Hong Kong show has attracted an impressive 3,000 exhibitors representing 46 countries and regions.

“The undiminished market desire for high-end jewelry is indicated by a 25 per cent growth in exhibitor number in the Hall of Extraordinary, which features exceptional jewelry pieces with high quality stones set in exquisite designs. The diamonds and precious stones section has also increased by 15 per cent,” organisers the Hong Kong Trade Development Council said in a statement announcing this year’s show.

Innovations in design will be on show during the 13th Hong Kong Jewellery Design Competition, while the event will also include seminars, jewellery runway shows and auctions.

“As well as being an important trading platform, the Hong Kong International Jewellery Show will hold a series of seminars and parades during the fair, to disseminate market intelligence on topics such as the “Outlook for Gold in Emerging Markets” and inspire buyers with showpieces on live models,” said the HKTDC.

Yet while economists and analysts expect the layoffs—predominantly at European financial institutions—to continue well into the first half of this year, they see limited impact on other sectors of the city’s economy over the coming months, in part because of the strength of the flow of money from mainland China to both the retail and financial markets.

A bigger concern, they say, is the threat that cuts in banking jobs could put a heavier strain on Hong Kong’s already sluggish property market. In the past few months, prices have declined for the first time since 2008. Jobless bankers may be more inclined to sell property, possibly triggering bigger price declines.

Already, banks with a major presence in the city, such as Royal Bank of Scotland Group PLC and Morgan Stanley, have announced thousands of job cuts globally, although the final number of those affected in Hong Kong isn’t yet clear. Those layoffs would add to U.K. banking giant HSBC Holdings PLC’s ongoing move to eliminate 3,000 jobs in the city, representing roughly 10% of its local work force.

European banks have expanded significantly in the region over the last few years to capitalize on the China growth story. Now, with the ongoing debt crisis at home, many are forced to shift their focus and halt investments in Asia.