Hong Kong shares up as energy strength buoys risk, China mixed

Mon Nov 19, 2012 2:42pm IST

Stocks

   

* HSI, H-shares +0.5 pct; CSI300 -0.1 pct

* Shanghai Comp ends up after hitting lowest intra-day since 2009

* China consumer sector hit by weak Tingyi, Parkson earnings

* Ping An Insurance slides, HSBC to sell stake

* Xi's anti-corruption call extends Wuliangye's downward spiral

By Clement Tan

HONG KONG, Nov 19 (Reuters) - Hong Kong shares bounced further on Monday from one-month lows seen last week, helped by strength in energy counters as higher oil prices and Kunlun Energy's surprise inclusion in the Hang Seng Index helped buoy interest in riskier counters.

Onshore Chinese stock indexes ended mixed on the day, with the Shanghai Composite Index making a late rally after striking its lowest intra-day level in more than three years during early afternoon trade. The rally was marked by a sharp jump in trading volume, albeit off low volumes.

The Shanghai index eventually ended up 0.1 percent at 2,017 points after it had earlier hit 1,999.1.

The CSI300 Index of the top Shanghai and Shenzhen listings slipped 0.1 percent.

The Hang Seng Index rose 0.5 percent, rebounding further from a one-month low set last Thursday. The China Enterprises Index of the top Chinese listings in Hong Kong also firmed 0.5 percent.

"Everybody's watching whether the Shanghai Composite will dip below 2,000 points. I think there will be more weakness ahead, and it's going to weigh on Hong Kong," said Jackson Wong, vice-president for equity sales at Tanrich Securities.

"Most of the money today is short term, I don't think many will want to come into the market at this point with so much uncertainty this week," he added.

Talks to avert a fiscal crisis in the United States and a meeting of European policymakers discussing more aid for Greece are among key events that could drive market volatility in the week ahead.

Despite the jump during afternoon trade, Shanghai volume was the second-lowest since Sept. 25 and some 23 percent below its average in the past month.

Hong Kong turnover was also weak, almost 15 percent below its 30-day moving average.

Shares of China Petroleum and Chemical Corp (Sinopec) climbed 1.7 percent to its highest in a week in Hong Kong after Brent crude rose to almost $110 a barrel as escalating violence between Israel and the Palestinians fuelled concerns about supplies from the Middle East.

Sinopec was also helped by a Citi upgrade from "neutral" to "buy" due to an improvement in its domestic refining margins that could aid an earnings recovery in 2013.

Chinese natural gas provider Kunlun Energy gained 3.1 percent, touching a record high in early trade, after the Hang Seng Index manager said the Chinese energy firm will become the 50th component of the benchmark index from Dec. 10.

Limiting gains on the benchmark Hang Seng Index, Ping An Insurance sank 1.9 percent after HSBC Holdings confirmed it was in talks to sell its $9.3 billion stake in China's second-largest insurer, stepping up a programme by Europe's largest bank to shed non-core parts of its business to boost profitability.

WEAK EARNINGS HIT CHINA CONSUMER PLAYS

Chinese consumer counters were key sectoral underperformers after third-quarter corporate earnings from department store operator Parkson Retail Group and the country's top instant noodle producer Tingyi Holdings both disappointed, raising fears that the slowdown in the Chinese economy is hitting the sector more than expected.

Parkson dived 8.8 percent to its lowest closing level since mid-September, while Tingyi reversed early gains after it posted underwhelming earnings at the midday trading break, ending down 1.5 percent.

In a report on Monday, UBS analysts said Parkson's 42.3 percent year-on-year decline in third-quarter earnings was a result of slowing sales compounded by an acceleration in store expansion that led to a sharp increase in related expenses.

"As more department stores report negative SSS (same store sales), we believe the sector valuation will be at much lower levels when negative operating leverage emerges," they said in the same report dated Nov 16.

Investors also unloaded liquor firms which, despite heavy spending of advertising, could suffer see sales drop as a result of Beijing's coming anti-corruption drive.

New Communist Party chief Xi Jinping was quoted by state media as saying on Monday that the party risks major unrest and the collapse of its rule if corruption is allowed to run wild. Officials are often gifted bottles of liquor by people seeking favour.

Chinese premium alcohol producer Wuliangye dived 5.8 percent to its lowest since August 2010, while Kweichow Moutai, shed 4.6 percent to close at its lowest since April 25 on fears.

CCTV said it had sold 15.8 billion yuan ($2.5 billion) of advertising spots for 2013, up 11 percent on 2012 and the most in 19 years. Chinese media reported that Wuliangye bought 499 million yuan and Moutai 352 million yuan worth of advertisement slots on CCTV evening news programming in 2013.

Wuliangye's Thursday losses were its worst in eight months. It is now down 11.3 percent on the year.

Kweichow Moutai is still up more than 10 percent this year, but has slumped 13.5 percent this month as party leaders repeatedly warned against the perils of corruption over the course of the 18th Party Congress that ended last week.

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