HK, China shares lower as rally proves short-lived

HONG KONG, June 12: Hong Kong stocks traced a pullback in global markets on Tuesday over worries about the euro zone and limited supported from data that showed Chinese
bank lending last month was stronger than forecast.
Uncertainty over the details of an EU bailout for Spanish
banks kept investors from chasing Monday’s rally, with funds mostly on the sidelines while morning turnover in Hong Kong fell to its lowest level this year.
Low volumes and high levels of short-selling have left the benchmark susceptible to sharp moves and intra-day reversals, with investors remain unwilling to hold positions for very long.
The Hang Seng index closed the session down 0.6 percent. Large-caps like HSBC Holdings and Tencent , which had led the previous session’s rally, were among the biggest drags on the benchmark.
HSBC shares gave up 1.3 percent, while Tencent and oil major CNOOC both fell 2.1 percent.
‘Europe remains the key. There are now concerns about Spain’s position and how that leaves Italy,’ said a Hong Kong-based trader at an American brokerage.
EU officials agreed on Saturday to lend Spain up to 100 billion euros ($125 billion), but investors soon began to worry about details such as how the deal would be structured and whether it would come with conditions.
Despite the latest data on new lending by Chinese banks coming in well ahead of forecasts, there were still worries about the hit to margins that banks might have to take as a result of last week’s rate cut, the Hong Kong-based trader said.
Chinese banks made a higher-than-expected 793.2 billion yuan ($125 billion) in new loans in May and money supply growth also picked up slightly, according to central bank figures rele+ased on Monday, suggesting monetary policy easing and faster government approval of investment projects are gaining traction.
The index of Chinese financials in Hong Kong was down 0.9 percent, tracking the broader market’s losses. China
Construction Bank, the nation’s No.2 lender by market value, outperformed and was up 0.2 percent.
A grim profit warning from Chinese sportswear retailer Li
Ning sent its shares down 7.2 percent to their lowest in 6-1/2 years, adding pressure on market sentiment.
Private equity-backed Li Ning warned of a ‘substantial decline’ in profit for 2012 due to weaker sales and higher marketing costs.
On the mainland, energy firms stayed weak with Petrochina
down 0.7 percent and Sinopec down 0.9 percent as crude oil prices extended losses.
Top coal producer China Shenhua fell 2 percent.
The real estate sector on the mainland extended its outperformance of China’s domestic markets, with hopes that lower borrowing costs would boost property sales continuing to underpin developers’ stocks.
The property sub-index in Shanghai rose 0.8 percent.
Poly Real Estate rose 3.3 percent after analysts at Goldman Sachs raised their target price on the stock by 13
percent on the back of an expected pick-up in contract sales.
Goldman, which maintains a ‘buy’ rating on the stock, said in a note to clients Poly stands to benefit more than its peers from a sales recovery in the mass market segment.