May 30, 2013 / 5:12 AM / 4 years ago

Hong Kong shares at one-month low as utilities slide

* HSI -0.5 pct, H-shares -1.0 pct, CSI300 -0.4 pct

* HK utilities slide as high yield tumble gains traction

* Link REIT sinks to lowest since February

* Chalco jumps after GS upgrade on expected 2013 profits

By Clement Tan

HONG KONG, May 30 (Reuters) - Hong Kong shares sank to their lowest in a month on Thursday, with the utilities sector joining a downward spiral in high yielding counters on fears that the U.S. Federal Reserve may soon begin tapering back its monetary stimulus.

At midday, the Hang Seng Index was down 0.5 percent, while the China Enterprises Index of the top Chinese listings in Hong Kong slid 1 percent. Both indexes are now hovering at their lowest levels since late April.

In the mainland, the CSI300 of the leading Shanghai and Shenzhen A-share listings slipped 0.4 percent. The Shanghai Composite Index lost 0.3 percent. Bourse volumes remained relatively robust.

Both onshore Chinese indexes are still set for their first monthly gain in four, up 7.6 and 6.4 percent, respectively. This compares to losses in May for the Hang Seng benchmark and the H-share index.

“This is not quite risk aversion because investors are rotating out of so-called defensive high yielding stocks into selective growth ones in a risk off environment,” said Wang Aochao, UOB-Kay Hian’s Shanghai-based head of China equity research.

“I suspect this may actually lead to increased foreign demand for Chinese shares listed in the mainland because the A-share market is relatively insulated from the global capital environment,” Wang added.

On Thursday, Power Assets, CLP Holdings and Hong Kong & China Gas were the biggest percentage losers among Hang Seng Index components, sliding 3.3, 3.1 and 2.8 percent, respectively.

Losses on the day took Power Assets to its lowest since March. Now up 6.9 percent in 2013 after double-digit percentage gains in the previous three years, it is now trading at 15 times forward 12-month earnings, a 19 percent premium over its historical median, according to Thomson Reuters StarMine.

Hong Kong property developer New World Development went into the midday trading break down 2.8 percent after earlier testing its lowest since January. Link Real Estate Investment Trust (REIT) tumbled another 3.7 percent to its lowest since February.

PATCHES OF STRENGTH

Aluminum Corporation of China (Chalco) jumped 3.3 percent in Hong Kong after Goldman Sachs upgraded its H-share listing from “sell” to “neutral,” expecting the company to turn profitable in 2013 after its proposed disposal of its loss-making aluminum extrusion and processing assets.

Gains on the day helped Chalco cut 2013 losses to 11.8 percent. Now trading at a 47 percent percent discount to its historical median price-to-book multiple, Chalco could see more gains in the short term as investors look to stay invested in a new environment as the Fed cut back on its quantitative easing.

Chinese brokerages A-share listings were strong, lifted by a report in the Economic Information Daily newspaper that mainland regulators are likely to lower the threshold for bond issues in the interbank market, with a short-selling trading mechanism under consideration.

In Shanghai, Haitong Securities climbed 3.1 percent to its highest since March, while CITIC Securities rose 1.1 percent and is now down 0.5 percent for the year.

Shuanghui Development surged 8.6 percent in Shenzhen after its parent Shuanghui International announced plans to buy Smithfield Foods Inc for $4.7 billion to feed a growing Chinese appetite for U.S. pork.

Shares of Chinese conglomerate Fosun International jumped 9 percent in Hong Kong after announcing a joint venture with Alibaba Group Holding Ltd and other parties in a logistics project valued at about 5 billion yuan ($816 million).

Our Standards:The Thomson Reuters Trust Principles.
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