May 18 (Reuters) - Hong Kong stocks remained lacklustre on Monday in the aftermath of profit-taking by major foreign investors following a 13 percent surge in April, and as inflows of mainland money failed to reach the levels needed to maintain the market's rise.
BNP Paribas Investment Partners said it has reduced its China exposure to lock in profit, due to increasing mismatch between companies' fundamentals and their share prices.
"You shouldn't purely count on the easy liquidity, and focus on very short term target. That's why we should make use of the chance to take profit," said Arthur Kwong, head of Asia Pacific equities at BNP Paribas Investment Partners.
On Monday, the Hang Seng index fell 0.8 percent, to 27,591.25, while the China Enterprises Index lost 0.6 percent, to 13,926.28 points.
The Hang Seng has been confined to a narrow range and suffered reduced trading volumes, disappointing hopes that April's surge would draw more mainland institutional money in search of relatively cheap Hong Kong shares.
Kwong, who manages about $2.2 billion worth of assets, said that the gap between Hong Kong and mainland shares - which helped trigger last month's bargain hunting - has narrowed sharply, with prices reflecting the kind of earnings growth some companies cannot deliver.
"I purely focus on fundamentals. I don't want to judge so much on what the other investors are going to do...so this is the time to trim some positions."
Earlier this month, Morgan Stanley downgraded MSCI China - which captures large and mid cap Chinese companies listed in Hong Kong - to equal-weight, from overweight, the first downgrade of the index since November 2008.
Meanwhile, mainland interest toward Hong Kong stocks has dwindled.
On Monday, Chinese investors only bought less than 300 million yuan worth of Hong Kong stocks under the Shanghai-Hong Kong Stock Connect scheme, merely 0.3 percent of the daily quota of 10.5 billion yuan.
Among the most actively traded stocks on Hong Kong's main board were CCT Land, down 6.3 percent to HK$0.03 Ch Innovation, up 34.5 percent to HK$0.11 and Cypress Jade, up 25.5 percent to HK$0.19. (Samuel Shen and Pete Sweeney; Editing by Simon Cameron-Moore)