Hong Kong shares close flat, consumer sector lifts China

Tue Aug 21, 2012 5:22am EDT

(Updates to close)

* HSI off 0.02 pct, CSI300 climbs 0.5 pct

* Turnover improves in both markets

* Tingyi at 4-1/2-mth high, gets upgrades after H1 results

* CNOOC sinks after earnings lag and dividend cut

By Clement Tan

HONG KONG, Aug 21 (Reuters) - Hong Kong shares ended flat on Tuesday, as strength in the Chinese consumer sector was offset by a 3 percent loss for China oil giant CNOOC Ltd, whose first-half profit fell twice as much as the market had expected.

Encouraging corporate earnings, along with mainland Chinese media reports of possible government moves to boost consumption, helped onshore China markets have their best day in almost two weeks.

Chinese food and beverage giant Tingyi Holdings enjoyed its best day in 9-1/2 months, jumping 6 percent on a series of broker upgrades after reporting better-than-expected first half net profit on Monday.

"Companies like Tingyi are the ones that have seen high growth rates in the past but, like China, are slowing down. Investors will have to get used to their slower rates of growth, but their market share still offers some defensive cover," said Edward Huang, an equity analyst with Haitong International Securities.

Helped by Tingyi's jump, the Hang Seng Index pared early losses and ended down 0.02 percent at 20,100.1. Since Aug. 6, the index has closed above 20,000 every day except one.

Turnover in Hong Kong improved 14 percent from Monday, while Shanghai volume rose 30 percent, but both remained on par with their 20-day moving averages.

The large cap-focused CSI300 Index of the top listings in Shanghai and Shenzhen rose 0.5 percent, as did the Shanghai Composite Index of more than 950 companies. For both indexes, Tuesday was their best day since Aug. 9.

Tingyi's Tuesday close was its highest since April 2. For the year, it is now down 6.4 percent, compared with the Hang Seng's 9 percent gain.

Deutsche Bank analysts upgraded the stock from "hold" to "buy" while increasing their target price by 16 percent from HK$20.60 to HK$23.90.

"(Tingyi's earnings) turnaround was driven by low input costs and, more importantly, market share gains," they said in a report dated Aug. 21, adding this is the first time Tingyi has held the biggest market share in noodles, tea, water and juice sectors.

The sector was also helped by an Economic Information Daily newspaper report that several Chinese ministries are mulling new policies to bolster domestic consumption later this year, to arrest the slowdown in the world's second-largest economy.

Premium alcohol producers, Shanghai-listed Kweichow Moutai and Shenzhen-listed Wuliangye played leading roles. They extended gains after Wuliangye posted on Sunday a 50 percent rise in net profit, largely in line with the its guidance.

Both stocks have outperformed the broader onshore Chinese market this year, although investors took some profits after Moutai posted underwhelming first half earnings.

Moutai is still up 22 percent this year, while Wuliangye has risen 7.6 percent, compared with the 1.4 percent drop for the CSI300 Index.

CNOOC SINKS AFTER EARNINGS MISS

CNOOC Ltd, China's leading offshore oil producer, slipped 3 percent, with losses accelerating after it posted at midday first half net profit that fell 19 percent from a year earlier.

It also cut its dividend by 40 percent to make room for its $15.1 billion acquisition of Canadian oil firm Nexen Inc . Tuesday's fall was CNOOC's biggest in a month, and the stock closed at its lowest since July 27.

Chinese independent power producers (IPP) were also weak. China Resources Power, which hit a near two-year closing high on Monday on encouraging first half profit, slipped 0.7 percent.

China Resources Power is still up almost 14 percent this year and has outperformed the broader market, as have IPP stocks, thanks to falling coal prices and interest rate hikes. But analysts such as those from JP Morgan are advising investors take profits from the sector. (Editing by Richard Borsuk)

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