Sunday, January 10, 2010

Asian Shares Higer, China's Brokerages Gain On Margin Trading

. Sunday, January 10, 2010

By stockOzone team

Shares in Hong Kong and China rose on Monday, with the financial sector outperforming, buoyed by news of stock index futures being approved among other reforms and strong Chinese trade data.

But in China, the benchmark index was sharply off its intraday high amid lingering worries over monetary tightening, more share supply and a clampdown on asset prices.

The Shanghai Composite Index .SSEC ended the morning up 1.35 percent at 3,239.090 points, but was far off an intraday high of 3,306.750 points hit in early trade.

Gaining Shanghai A shares outnumbered losers 511 to 367, while turnover rose to 107 billion yuan ($16 billion) from Friday morning's 59 billion yuan.

"Sentiment is still cautious overall and the index will find it hard to rise beyond the previous high of 3,361 points in the short term," Li Wenhui, senior analyst at Huatai Securities in Nanjing, referring to the level reached on Nov. 24.

Last week, the market fell by 2.5 percent amid worries over the central bank's move to tighten liquidity and the China Securities Regulatory Commission's move to add share supplies to clamp down on excessive asset prices.

After the market closed on Friday, the government announced that it had granted approval in principle for the country's first index futures and margin trading -- key reforms that will give the market badly needed hedging tools.

Analysts said investors took the news of the much-awaited reforms in stride but some stocks such as brokerages, which will be the primary beneficiaries of the reforms, outperformed.

Top brokerage CITIC Securities (600030.SS), which jumped by its 10 percent daily limit at the opening, was up 5.02 percent at 33.88 yuan by midday. Smaller rival Haitong Securities (600837.SS) added 3.7 percent to 19.63 yuan. The two were the most actively traded stocks.

Banks, which are heavyweights in the index, also performed strongly as institutional investors bought their shares to have a bigger say in the derivatives when index futures are launched -- expected in about three months.

Top lender Industrial and Commercial Bank of China (601398.SS) added 2.68 percent to 5.37 yuan.

The market was also buoyed by news on Sunday that growth in China's exports and imports last month blew past expectations, providing fresh evidence of the vigour of the economy.

Property companies continued their downtrend of recent weeks weighed by fresh signs of the government's clampdown on asset prices. China Vanke (000002.SZ) fell 0.77 percent to 10.27 yuan by mid-morning.

China vowed on Sunday not to let foreign speculative investment affect the property market, the latest expression of official concern that real-estate prices are racing ahead too fast.

The benchmark Hang Seng Index .HSI was up 1.37 percent or 304.64 points at 22,601.39 at midday. The China Enterprises Index .HSCE of top locally listed mainland Chinese stocks was up 1.65 percent at 13,249.98.

"There will be a chance for more upside this week," said Castor Pang, research director at Cinda International. "In the short term, most investors seem more optimistic about the A-share market and that will help the Hang Seng Index."

Market turnover rose to HK$41.5 billion ($5.35 billion) from midday Friday's HK$40.3 billion.

Brokerages also soared and were among the top percentage gainers in Hong Kong.

Shenyin Wanguo (0218.HK) jumped 10.7 percent to HK$4.76, easing from a five-month high of HK$4.88 set earlier in the morning. Tanrich Financial Holdings (0812.HK) rose 14.98 percent to HK$0.238. First Shanghai Investments (0227.HK) gained as much as 16.9 percent to a 19-month high of HK$1.66.

But Cinda's Pang said the gains were unsustainable.

"Most Hong Kong brokerages can't benefit from the policy, since they are involved only in Hong Kong business," he said. "Investors are only using this as an excuse to push prices up."

Aluminum Corp of China Ltd (Chalco) (2600.HK), the country's top aluminium company and the world's third-largest alumina producer, rose as much as 6.14 percent to the highest in more than 18 months after the company raised its alumina spot price by 7.1 percent to 3,000 yuan ($439) per tonne from Jan. 8.

By midday, the stock traded at HK$10.48, up 5.54 percent, but off an intraday high of HK$10.54.

China Shenhua Energy (1088.HK), China's largest coal producer, advanced 2.77 percent to HK$40.75 on hopes that thermal coal prices will keep rising as a severe winter across China strains domestic supplies, sparking a jump in prices.

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

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