Hong Kong, China shares down again, Chinese banks slide
(Updates to midday)
* HSI sheds 1.1 pct, CSI300 inches down 0.1 pct
* Lenovo hit by NEC stake sale, slips below deal price range
* Minsheng Bank slumps, JP Morgan adds to downgrade gloom
* China property limits A-share losses
By Clement Tan
HONG KONG, Sept 5 (Reuters) - Hong Kong stocks fell for a fifth day in six on Wednesday, with weakness spreading to more parts of the market including companies that posted encouraging first half earnings, underscoring fragile market confidence.
The Chinese banking sector was weak on growing concerns over the quality of the assets it held. China Minsheng Bank sank to its lowest in 11 months after JP Morgan joined Credit Suisse in downgrading its outlook for the stock.
Mainland Chinese markets inched lower but were relative outperformers on the day, lifted by the property sector which climbed after local media reported Beijing is unlikely to unveil more curbs on the sector.
The Shanghai Composite Index and the CSI300 Index of the top Shanghai and Shenzhen listings each slipped 0.1 percent at midday. The China Enterprises Index of the top Chinese listings in Hong Kong shed 1.5 percent.
The Hang Seng Index went into the lunch break down 1.1 percent at 19,211.3, but held above chart support at 19,162.3, the top end of the gap formed between a July 26 high and a low the following day.
Chinese PC maker Lenovo, the world's second-largest name by sales in the sector, slumped 6.8 percent after Japan's cash-strapped NEC Corp sold its entire stake in the Chinese PC maker in a deal worth 18 billion yen ($229.6 million).
"Confidence is clearly lacking. Lenovo reported pretty good earnings, but I think some doubts are emerging with the NEC stake sale today, with China still slowing," said Wang Ao-chao, UOB-Kay Hian's Shanghai-based head of China research.
Wednesday's losses took Lenovo shares below HK$6.30, the lower end of the range at which the deal was priced, suggesting investors were expecting further weakness in the stock.
Lenovo posted first half earnings on Aug. 16 that beat market expectations, but a slowing Chinese economy, the company's largest market, could eat into its profits in the second half.
Since hitting a post-earnings high on Aug. 17, Lenovo's share price has steadily declined. It has lost 12 percent since then, but is still up 19 percent for the year.
CHINA BANKS WEAK, ASSET QUALITY FEARS WORSEN
Weakness in the Chinese banking sector plagued Hong Kong and onshore Chinese markets. The sector accounted for the seven of the top 10 drags on the CSI300 and two of the top five drags on the Hang Seng Index.
Minsheng Bank was the worst loser in the sector, slumping 5.5 percent in Hong Kong and 3.5 percent in Shanghai in heavy volumes after JP Morgan analysts downgraded its stock from "overweight" to "neutral" and cutting their target price by 22 percent.
"Asset quality is now deteriorating across the China banking sector, and rate cuts and deposit competition continue to squeeze NIM," said JP Morgan analysts led by Josh Klaczek in a note, referring to net interest margin.
"In this environment, performance favors defensive balance sheets with excess capital and/or liquidity, two areas where Minsheng is constrained," they said. Minsheng's niche lending strategy focused on small-and-medium-sized firms could be a further source of strain, they said.
JP Morgan's downgrade on Wednesday, followed a similar downgrade by Credit Suisse on Tuesday. Minsheng has now lost more than 10 percent in Hong Kong this week. (Additional reporting by Vikram Subhedar; Editing by Sanjeev Miglani)
- Tweet this
- Share this
- Digg this