China, HK stocks gain in cautious session

Tue Feb 2, 2010 1:03am EST

* Metals shares up on higher commodity prices

* Chinese bank advance loses steam in Hong Kong (Updates to midday)

By Jun Ebias and Claire Zhang

HONG KONG/SHANGHAI, Feb 2 (Reuters) - Shares in China and Hong Kong were up in a cautious session on Tuesday, with metals issues up on rising commodity prices, while Chinese banks succumbed to profit-taking.

Hong Kong shares gave up earlier gains to close up 0.22 percent at midday, but turnover remained low, suggesting that most investors remained on the sidelines, worried that China may take more steps to rein in liquidity and curb bank lending.

Sentiment remained cautious, with the Shanghai market still under pressure from heavy new share supplies.

A major new listing fell below its IPO price on its first day of trade -- a rarity in the mainland market -- for the second time in less than a week.

The Shanghai Composite Index .SSEC ended the morning up 1.05 percent at 2,972.319 points, after closing at its lowest in 3-½ months on Monday.

Gaining Shanghai A shares outnumbered losers by 658 to 230, while turnover dipped to 54 billion yuan ($7.9 billion) from Monday morning's 56 billion yuan as trading wound down ahead of a week-long holiday to celebrate the Lunar New Year, which this year falls on Feb. 14.

Shandong Gold (600547.SS) jumped 6.89 percent to 67.47 yuan after gold prices posted their biggest daily gain in three months overnight, boosted by an oil rally. Jiangxi Copper (600362.SS) climbed 3.74 percent to 34.09 yuan on rising metals prices.

In Hong Kong, Real Gold (0246.HK) rose 6.85 percent, while Jiangxi Copper (0358.HK) was up 2.57 percent.

"The index is being lifted by overseas markets today, but the rebound is weak," said Zhang Gang, strategist at Central Securities in Shanghai. "IPOs are still coming at too fast a pace and there are too many of them on the horizon. The market is still suffering from liquidity pressures, but after the recent sell off the index is expected to hold stable before the Lunar New Year."

Tuesday brought additional news on new share supplies and an official clampdown on liquidity that is weighing on the market.

Huatai Securities said on Tuesday it would launch a Shanghai IPO this week that analysts said could raise up to 16.5 billion yuan, making it China's largest IPO so far this year. [ID:nTOE6100AY]

China's banking regulator has also ordered lenders to conduct checks on whether any of their loans have illegally gone into the stock or property markets, a banking source told Reuters on Monday. [ID:nTOE610090]

Investors have grown increasingly wary of new listings, with China Erzhong Heavy Industries (601268.SS) falling below its IPO price on its listing debut on Tuesday. It ended the morning at 8.28 yuan, down 2.59 percent from its IPO price of 8.50 yuan.

On Jan. 28, China XD Electric (601179.SS) became the first mainland listing in 5-½ years to end its debut day below its IPO price. On Tuesday, it fell 2.59 percent to 7.52 yuan, still below its IPO price of 7.90 yuan.

Beijing Dalong Weiye Real Estate Development (600159.SS) was the morning's biggest loser in Shanghai, down 7.31 percent at 15.86 yuan after saying it was ordered to return to the government land in Beijing that it had bid for during an auction last November.

HONG KONG GIVES UP EARLY GAINS

The benchmark Hang Seng Index .HSI was up 43.56 points at 20,287.31 at midday, after earlier climbing to as high as 20,533.96. Turnover was HK$37.1 billion ($4.78 billion), slightly higher that midday Monday's HK$37 billion.

For HSI technicals, click here

The China Enterprises Index .HSCE of top locally listed mainland Chinese stocks was down 0.17 percent at 11,602.22.

"Sentiment remains cautious and many people are still not very keen to trade," said Alex Wong, director at Ample Finance Group. "The afternoon session will be quite crucial. We need to hold above 20,100 points. If we see further weakness from here, sentiment will probably turn bearish again."

CVM Minerals (0705.HK) dropped 16.28 percent when it resumed trading on Tuesday. The company said it was selling shares at HK$0.36 each, a 16.3 percent discount to its closing price before it was suspended on Monday.

Chinese banks succumbed to profit-taking, with Industrial and Commercial Bank of China (1398.HK) down 0.52 percent after rising as much as 1.77 percent earlier. ICBC said its new loans in January totalled about 110 billion yuan ($16 billion), less than in the same month last year. [ID:nBJC002489]

China Construction Bank (0939.HK) slipped 0.66 percent, reversing an earlier 1.48 percent gain.

China Merchants Bank (3968.HK) ended the morning up 2.08 percent after rising as much as 3.3 percent. The lender said it won approval from the country's stock regulator for a rights issue to raise up to 22 billion yuan ($3.22 billion) to replenish capital. [ID:nTOE61003W]

HyComm Wireless Ltd (0499.HK) surged 18.54 percent, after it said it was in preliminary discussions with Stanley Choi and Cai Dabiao, founder of China's "Real Kungfu" Chinese fast food chain, regarding the proposed formation of a consortium for acquiring Fu Ji Food and Catering Services (1175.HK).

Chinese developer Country Garden Holdings (2007.HK) was up 2.77 percent, after it reported higher contract sales.

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