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China shares have worst day in over a week, underperform Hong Kong
March 26, 2013 / 9:13 AM / 5 years ago

China shares have worst day in over a week, underperform Hong Kong

* HSI +0.3 pct, H-shares -0.5 pct, CSI300 -1.5 pct

* Everbright Securities private placement stokes IPO jitters

* AgBank, Bank of China slip ahead of 2012 earnings

* China property unfazed by Guangdong curb details

By Clement Tan

HONG KONG, March 26 (Reuters) - China shares suffered their biggest loss in more than a week on Tuesday after Everbright Securities obtained approval for a private share placement, stoking fears of a new wave of stock-offerings by brokerages.

Earnings-driven strength in the Hong Kong property sector helped the Hang Seng Index reverse slim midday losses to end up 0.3 percent. The China Enterprises Index of the top Chinese listings in Hong Kong slipped 0.5 percent.

The CSI300 of the leading Shanghai and Shenzhen listings sank 1.5 percent, while the Shanghai Composite Index was off 1.3 percent. For both, Tuesday was their heaviest loss since March 18.

Everbright sank 2.6 percent in Shanghai after the China Securities Regulatory Commission approved plans for it to raise up to 8 billion yuan ($1.29 billion) in the mainland to boost the company’s core capital, IFR reported.

“The fear is that Everbright’s private placement is the first of many fundraising attempts, which could inevitably involve a public offering,” said a Shanghai-based trader with a major Chinese brokerage.

Losses for Everbright on Tuesday took its shares to the lowest in a week. Haitong Securities fell 4.3 percent in Shanghai and 0.7 percent in Hong Kong ahead of 2012 corporate earnings.

Shares of Haitong are down 15.5 percent in Hong Kong in 2013, compared with a 4.5 percent slide for the China Enterprises Index.

In the last 30 days, two of 16 analysts who follow Haitong have downgraded their earnings-per-share estimates by an average of 32 percent, according to Thomson Reuters StarMine.

In 2012, China’s 114 brokerages together earned less than Wall Street bank Goldman Sachs did, and the combined profit for the Chinese firms was down 16 percent from a year earlier, industry data showed in mid-January.


Corporate earnings remained a big focus on Tuesday, with at least 38 Hong Kong-listed companies due to report final 2012 results. Of the 58 percent of companies that had already reported in Hong Kong, over half have missed expectations, according to StarMine.

Hong Kong property developer Henderson Land jumped 5.5 percent after its 2012 results impressed, while a fall in shares of Wharf Holdings was reversed after its earnings came out at midday.

The two lifted Hong Kong property peers. Cheung Kong Holdings rose 2.3 percent ahead of its own results after market close on Tuesday. It reported 2012 net profit of HK$32.2 billion ($4.15 billion), trumping expectations for HK$23.7 billion.

Markets were also hurt by a report in the official China Securities Journal that Chinese banks have restricted the pace and scale of lending to the property sector as part of greater governmental risk controls.

Mid-sized lender Minsheng Bank dived 4.6 percent in Shanghai, hurt also by chatter of possible tightening after the Chinese central bank drained 32 billion yuan from the money markets.

In Hong Kong, Agricultural Bank of China (AgBank) slipped 0.8 percent, while Bank of China was down 0.3 percent ahead of their 2012 earnings.

After markets closed, AgBank, the country’s No.3 lender, reported a 19 percent rise in net profit, missing analyst estimates, as the central bank’s interest rate cuts sliced loan margins.

Bank of China, the country’s No.4 lender, said on Tuesday its 2012 net profit rose 12.2 percent, beating analyst estimates, as wider margins from lending to smaller businesses helped offset a slowdown in foreign operations.

The Chinese property sector was relatively unfazed as Guangdong became the first province to release a plan for localised real estate curbs. The central government had announced guidelines for local-government curbs on March 1.

China Vanke ended a choppy day down 0.2 percent in Shenzhen. It has now retraced almost a third of its 10 percent tumble on March 4 when markets first reacted to the Beijing announcement, but has been range-bound since.

Vanke is still up 9.9 percent on the year, compared to the 2.1 percent gain for the CSI300 index.

A problem with Guangdong’s announcement is that it “didn’t read any different from what Beijing prescribed at the start of March, but there are a few more days left to the end-March deadline for local governments to announce their curb customisation,” said Lee Wee-Liat, head of Asia property research at BNP Paribas.

$1 = 7.7618 Hong Kong dollars$1 = 6.2107 Chinese yuan

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