HONG KONG, Aug 17: Hong Kong shares on Friday rebounded from a two-week low, helped by broad strength in riskier sectors after German Chancellor Angela Merkel voiced her support for the European Central Bank, easing fears over Europe’s debt crisis.
The Hang Seng Index was up 0.5 percent going into the noon break, returning above the 20,000 level and back into the 240-point range it has traded for most of the last two weeks.
But it is still down 0.4 percent on the week, set for its first weekly loss in three. Market turnover in Hong Kong has been dismal this week, nearing lows for the year.
Chinese internet giant Tencent Holdings soared 2.4 percent to a record high, as investors continued to reward the encouraging interim results it posted earlier this week.
On the flip side, China Mobile, the second biggest weighted stock on the Hang Seng index, dropped 3.4 percent by the noon break, following a 5-percent fall on Thursday, its worst single day showing in a year, in reaction to disapointing first-half results.
China’s largest mobile provider’s unexpectedly weak earnings also hurt smaller sector rivals. China Unicom slipped 3.5 percent to a two-week low in Hong Kong, while China Telecom shed 2.7 percent.
In the mainland, the CSI300 Index of the top Shanghai and Shenzhen listings fell 0.6 percent to its lowest since Jan. 9 and is down 3.9 percent for the week.
The Shanghai Composite Index shed 0.1 percent and is down 2.7 percent this week as midday bourse volume sank to a fresh 2012 low.
‘Funds are waiting for new buying opportunities and earnings will give an indication of how things will be for the second half of the year,’ said Alan Lam, Julius Baer’s Greater China equity analyst.
‘The market will continue to be range-bound in the near term, but there are opportunities in some sectors, particularly the beaten down ones that beat earnings expectations. I’d be more selective given that defensives are getting a bit too expensive,’ Lam added.
LARGE CHINA BANKS MOSTLY STRONG GOING INTO EARNING
Ahead of its earnings later in the day, mid-sized China Merchants Bank inched down 0.1 percent in Hong Kong, bucking strength in most of its larger sector peers on the day.
China Merchants’ Hong Kong listing is down 10 percent in 2012, compared to the Hang Seng Index’s 8.8 percent gain and the China Enterprises Index’s 1.4 percent decline.
China Construction Bank, the second-largest lender in the mainland, rose 0.8 percent. It is up 2.9 percent this month, but it is still down 0.6 percent in 2012.
Its larger sector rival, Industrial and Commercial Bank of China (ICBC) is up 1.1 percent on the day and 0.9 percent this month after rising 3.7 percent in July. But it is still down 2.6 percent this year.
The Chinese banking sector has seen some strength over the last month as investors look to make a tactical move, leveraging on its low valuations and high dividend yields with first half earnings unlikely to disappoint, Julius Baer’s Lam said.
But in the longer term, investors remain wary, with the outlook mixed for the sector.
The official Shanghai Securities News reported on Friday that CCB will focus on loan control in the second half of the year and make stability a top priority.
But Beijing’s two interest rate cuts to boost growth will likely diminish net interest margins in the short to medium term. State-run media reported on Friday that the Chinese central bank will likely cut interest rates again first before reducing reserve requirements for banks.
Also, with Beijing’s moving to boost growth in its sagging economy by upping fixed asset investments, Chinese banks, particularly the ‘Big Four’ state-owned ones, will be expected to provide credit, heightening concerns over balance sheet quality.
Underscoring that risk, local Chinese media reported on Friday that the non-performing loan ratio in the Chinese entrepreneurial hub Wenzhou was 2.85 percent at end-July, up from 2.69 percent at end-June—the eleventh monthly increase.
(agencies)
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