HONG KONG, CHINA SHARES DROP
Date: 11/04/2012
HONG KONG: Financial and resource sectors dragged Hong Kong and China shares lower on Wednesday ahead of data that could suggest the slump in the world's second-largest economy will last beyond the first quarter.
A decent performance by so-called defensive stocks and a low turnover in Hong Kong underlined investor caution, with both the Hang Seng Index and the China Enterprises Index of the top mainland listings in the territory shedding 1.3 percent.
The HSI currently sits at 20,091.7 points, just above its 200-day moving average, now at 20,017.8. A pick up in volume combined with a break below that level, which would be the first since Feb. 1, could point to further losses.
In mainland Chinese markets, the Shanghai Composite Index and the broader CSI300 Index, which also tracks some stocks listed in the city of Shenzhen, each lost 0.3 percent.
But midday A-share turnover on the Shanghai bourse was at its highest since Feb. 21, with property stocks accounting for a sizeable chunk of this as developers continued to report encouraging March sales figures.
"I would be more cautious though. I don't think the market is expecting Beijing to loosen monetary policy too soon or in an aggressive fashion, let alone the property sector," said Edward Huang, an equity strategist at Haitong Securities International.
"Investors are reducing positions because China data has so far not been very encouraging. It looks like we could now only see a bottom in the second quarter, which is bound to delay any rebound in earnings as well," Huang added.
Economic data from Beijing this week culminates with first quarter GDP on Friday that could disappoint investors betting on a bottoming of a cyclical downswing last quarter.
Shares of Chinese oil majors were among the top drags on benchmark indices in both markets. PetroChina Co Ltd slipped 1.8 percent in Hong Kong and 0.5 percent in Shanghai.
Chinese banks, which have underperformed the broader markets this year, were still weak. The mainland's biggest lender, Industrial and Commercial Bank of China (ICBC), shed 1.4 percent to near a more than two-month low.
ICBC is up 7.2 percent this year, compared with a 9 and 5.3 percent gain for the Hang Seng Index and China Enterprises Index respectively. Its smaller peers, such as Agricultural Bank of China (AgBank), have fared worse.
AgBank slipped 1.5 percent on Wednesday to bring its losses on the year to 3 percent. That was depite AgBank being among three entities in the Chinese banking sector that were upgraded to neutral from underperform by Credit Suisse analysts on Wednesday.
While first quarter earnings expected from next week are likely to decline, Chinese banks' operating cash-flow situation has improved along with liquidity, Credit Suisse strategists led by Vincent Chan wrote in the same note.
"Local government debt maturity has largely been extended and risks from the property sector seem more manageable," they said, upgrading Chinese banks overall from marginally underweight to marginally overweight.
Powered by THE ECONOMIC TIMESA decent performance by so-called defensive stocks and a low turnover in Hong Kong underlined investor caution, with both the Hang Seng Index and the China Enterprises Index of the top mainland listings in the territory shedding 1.3 percent.
The HSI currently sits at 20,091.7 points, just above its 200-day moving average, now at 20,017.8. A pick up in volume combined with a break below that level, which would be the first since Feb. 1, could point to further losses.
In mainland Chinese markets, the Shanghai Composite Index and the broader CSI300 Index, which also tracks some stocks listed in the city of Shenzhen, each lost 0.3 percent.
But midday A-share turnover on the Shanghai bourse was at its highest since Feb. 21, with property stocks accounting for a sizeable chunk of this as developers continued to report encouraging March sales figures.
"I would be more cautious though. I don't think the market is expecting Beijing to loosen monetary policy too soon or in an aggressive fashion, let alone the property sector," said Edward Huang, an equity strategist at Haitong Securities International.
"Investors are reducing positions because China data has so far not been very encouraging. It looks like we could now only see a bottom in the second quarter, which is bound to delay any rebound in earnings as well," Huang added.
Economic data from Beijing this week culminates with first quarter GDP on Friday that could disappoint investors betting on a bottoming of a cyclical downswing last quarter.
Shares of Chinese oil majors were among the top drags on benchmark indices in both markets. PetroChina Co Ltd slipped 1.8 percent in Hong Kong and 0.5 percent in Shanghai.
Chinese banks, which have underperformed the broader markets this year, were still weak. The mainland's biggest lender, Industrial and Commercial Bank of China (ICBC), shed 1.4 percent to near a more than two-month low.
ICBC is up 7.2 percent this year, compared with a 9 and 5.3 percent gain for the Hang Seng Index and China Enterprises Index respectively. Its smaller peers, such as Agricultural Bank of China (AgBank), have fared worse.
AgBank slipped 1.5 percent on Wednesday to bring its losses on the year to 3 percent. That was depite AgBank being among three entities in the Chinese banking sector that were upgraded to neutral from underperform by Credit Suisse analysts on Wednesday.
While first quarter earnings expected from next week are likely to decline, Chinese banks' operating cash-flow situation has improved along with liquidity, Credit Suisse strategists led by Vincent Chan wrote in the same note.
"Local government debt maturity has largely been extended and risks from the property sector seem more manageable," they said, upgrading Chinese banks overall from marginally underweight to marginally overweight.
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