Hong Kong shares weak, China set for 2nd straight loss

Tue Apr 10, 2012 1:02am EDT

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(Updates to midday)

* HSI slips 1.1 pct, Shanghai Comp down 1 pct

* Bearish technical signs developing for both markets

* Chinese banks weak, loan growth, Q1 GDP data eyed

* Li & Fung extends downward spiral

By Clement Tan

HONG KONG, April 10 (Reuters) - Hong Kong shares fell over one percent on Tuesday, dragged lower by banks after a holiday weekend during which weak data from the U.S. and higher-than-expected inflation in China dented risk appetite.

Mainland Chinese markets were also weak, with the Shanghai Composite Index set for its second straight loss, down 1 percent at midday with bearish signals developing on the charts.

Both markets were little swayed by data on Tuesday that showed China swinging to a surprise trade surplus of $$5.35 billion in March as import growth eased from a 13-month peak.

But along with data on Monday that showed China's annual inflation rate jumping more than expected in March to 3.6 percent, expectations of near-term monetary policy easing could be doused if other data come in stronger than expected.

The China Enterprises Index was down 1.4 percent, while the broader Hang Seng Index lost 1.1 percent to below its 23.6 percent Fibonacci retracement of its move from October lows to February highs.

A gauge of Chinese financials listed in Hong Kong was among the bigger underperformers, slipping 1.5 percent, with China Construction Bank (CCB) the top drag on the Hang Seng Index, shedding 1 percent.

"The Chinese banking sector is kind of stuck at this point. March loan growth data and first-quarter GDP figures could give investors a better idea of what Beijing could do to boost growth," said Jackson Wong, Tanrich Securities' vice-president for equity sales.

Foreign exchange reserves, money supply and loan growth data are expected anytime from Tuesday to Sunday, with first-quarter GDP and March industrial output, urban investment and retail sales scheduled for Friday.

China Minsheng Bank produced a rare gain among Chinese banks, up 0.1 percent to HK$7.48 in midday volume double its 30-day average on some brokerage upgrades after the bank completed its H-share placement.

Goldman Sachs analysts upgraded their target price for the mid-tier Chinese lender from HK$9.70 to HK$10, while Nomura upgraded the stock from neutral to buy, while raising its target price from HK$7.47 to HK$8.70.

GROWTH-SENSITIVE SECTORS SLIDE

On Tuesday, exporter Li & Fung continued its downward spiral on lacklustre U.S. data, slumping 3 percent to HK$16.70, nearing lows in February and March this year that formed a double bottom on the charts at about HK$16.40.

Li & Fung, which manages supply chains for retailers including Wal-Mart Stores Inc and Target Corp, has now slumped 16 percent since March 23 when it closed at its highest since last April.

In Shanghai, fears that slowing growth could hurt demand more than expected hit resources-related stocks, with the Shanghai materials sub-index the standout underperformer, slumping 2.4 percent.

China's imports of copper fell 4.6 percent to 462,182 tonnes in March from 484,569 tonnes the previous month.

Jiangxi Copper slipped 1.6 percent, while Xiamen Tungsten Co Ltd slumped 6.3 percent. Inner Mongolia Baotou Steel Rare Earth Group was the top drag on the Shanghai Composite, slumping 6.5 percent. (Editing by Nick Macfie)

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