Hong Kong shares set to snap 5-day winning streak, China weak

Thu Aug 2, 2012 1:07am EDT

(Updates to midday)

* HSI down 0.7 pct, CSI300 declines 0.8 pct

* Hutchison weak ahead of H1 earnings after markets close

* PetroChina weak on earnings worries

* Strong defensives, weak turnover flag caution ahead of ECB

By Clement Tan

HONG KONG, Aug 2 (Reuters) - Hong Kong shares are poised to end a five-day winning streak on Thursday, as weakness in oil giant PetroChina outweighed strength in defensive counters, pointing to caution ahead of a European Central Bank meeting later in the day.

Lackluster midday turnover further pointed to risk aversion, after the U.S. Federal Reserve offered no new measures to stimulate the economy, giving investors little incentive to return to the market in a big way.

Mainland Chinese markets also moved lower, with a second attempt by China's securities regulator in as many days to urge companies to buy back their shares failing to enthuse sceptical retail investors.

The Hang Seng Index shed 0.7 percent at 19,678.1, barely holding above its 200-day moving average now at 19,677.1. The China Enterprises Index of the top Chinese listings in Hong Kong bled 1.1 percent.

"It will probably not hold at the 200-day moving average if ECB disappoints later today. We will probably see some support at 19,000 from which we rallied about 1,000 points in a week," said Alan Lam, Julius Baer's Greater China equity analyst.

The CSI300 Index closed down 0.8 percent at midday, while the Shanghai Composite Index lost 0.5 percent, both paring gains from Wednesday after the securities regulator's first attempt at bolstering market sentiment.

Ahead of its interim earnings expected later in the day, shares of Hong Kong ports-to-telecoms conglomerate Hutchison Whampoa slipped 1 percent. It is up 5.7 percent in 2012 so far, compared to the Hang Seng Index's 6.7 percent gain.

Prior to Thursday, Hutchison was trading at 12.1 times forward 12-month earnings, a 40 percent discount to its historical median, according to Thomson Reuters StarMine.

The Hong Kong utilities sector, seen a popular defensive play, was strong. Power Assets rose 0.7 percent, while CLP Holdings gained 0.2 percent.

PETROCHINA LEAD BENCHMARK INDICES LOWER

PetroChina Co Ltd was among the top drags on benchmark indices in Hong Kong and China on Thursday on growing worries about their interim earnings expected later in August, analysts said.

The Chinese oil giant's 2.6 percent loss in Hong Kong pared its gains from the previous two days. PetroChina also lost 0.3 percent in Shanghai.

Following its first effort on Wednesday to get cash-rich companies to buy back their own shares to bolster the onshore Chinese stock markets, the China Securities Regulatory Commission on Thursday encouraged companies whose share price has fallen below its net asset value per share to buy back shares.

"I think the market is getting a bit numb to what the CSRC is trying to do," said Chen Yi, a Shanghai-based analyst with Xiangcai Securities.

He added the regulator is limited in what they can do to bolster market sentiment, saying investors are looking to the Chinese central bank for more policy easing that will boost liquidity conditions and economic growth. (Editing by Jacqueline Wong)

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