Tuesday, August 18, 2009

HK, China Shares Hover After Two Volatile Sessions

. Tuesday, August 18, 2009

By stockOzone team

Hong Kong shares weaved in and out of negative territory on Wednesday as investors exercised caution ahead of key earnings announcements, including those from Chinese lenders and top wireless operator China Mobile (0941.HK).

Chinese stocks dropped slightly but managed to hold steady in the wake of recent volatility after China's three most influential official securities newspapers published bullish comments and sought to talk up the market.

"It is difficult to judge regulator attitudes now, but we expect the market to see a continued period of volatility in the short term," said analyst Wen Lijun at Nanjing Securities. "Share valuations are still at high levels and investor confidence is weak, as indicated by the thin turnover."

Analysts pointed out that it was not unusual in the 18-year history of China's stock market for state media to try to talk up the market before regulators come forward with market-boosting steps.

By 0400 GMT the benchmark Hang Seng Index .HSI was down 0.2 percent at 20,263.17.

"Upward momentum for the index is weak; resistance is now at the 10-day moving average of around 20,600 points. In the absence of major fund inflows, the market will continue to consolidate," said Ben Kwong, chief operating officer with KGI Asia.

Bank of Communications (3328.HK), which kicks off the earnings season for mainland banks on Wednesday, was down 0.4 percent.

The world's largest lender, Industrial and Commercial Bank of China (1398.HK), which follows on Thursday, had fallen 0.9 percent, while Bank of China (3988.HK) was down 1.1 percent.

Chinese banks boosted lending at a record pace in the first half of the year but are set to report lower first-half earnings on compressed interest margins.

The China Enterprises Index .HSCE, which represents top locally listed mainland Chinese stocks, dropped 0.3 percent to 11,414.05.

Europe-focused fashion brand Esprit Holdings (0330.HK) jumped 4.5 percent after data showed German investor sentiment hit its highest level in more than three years in August, stoking hopes for a recovery in Europe's largest economy. The German market accounts for nearly half of Esprit's total sales.

Maanshan Iron & Steel (0323.HK)slid 3.9 percent after posting a loss for the first half of 2009, against a profit a year earlier, as sales volume and prices of steel products fell on declining demand amid the economic crisis.

The steelmaker said domestic steel product prices looked uncertain in the second half, despite expected growth in demand.

The Shanghai Composite Index .SSEC was down 0.4 percent at 2900.40 by midday.
Minsheng Bank (600016.SS), China's first private-sector bank, jumped 1.4 percent to 7.31 yuan to become the most active stock in morning trade after the lender posted a better-than-expected 22 percent rise in its first-half earnings from a year earlier.

The official ChinaSecurities Journal said in a commentary that China's recovering economy and itscontinuation of a relatively loose monetary policy indicated its stock market should have little potential to melt down.

The Shanghai Securities News said securities mutual funds were estimated to be able to pump 60 billion yuan ($8.8 billion) into China's stock market before the start of October, either from newly approved funds or via new products, offering a buffer after the market's tumble over the past couple of weeks.

The Securities Times said averagestock holdings at China's funds rose slightly to 87 percent of total portfolios by Monday from 86 percent at the end of the second quarter, indicating that Chinese funds have not trimmed their stock positions despite the market's recent slump.

They said the state media comments would at least signal that the government would not tighten its monetary policy significantly for now at the expense of a tumbling stock market.

In a sign of a more stable easy monetary stance, the Chinese central bank kept auction yields of its bills and bond repurchase agreements unchanged on Tuesday, signalling the end of a cycle of liquidity tightening over the past several weeks.

China Everbright Securities (601788.SS) fell 7.2 percent to 25.43 yuan after rising 30 percent in its Shanghai debut on Tuesday.

Disclosure: Author does not own any of the stocks discussed here.

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