Hong Kong shares slip as retailers weigh, China weak too

Wed Sep 26, 2012 1:23am EDT

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(Updates to midday)

* HSI down 0.9 percent, HSCE down 1.4 percent

* CSI300, Shanghai Comp off 0.6 pct

* Prada, Esprit weak as retailers on backfoot

* BYD shares in HK slump 10 pct on CLSA report

* HKEx down 2.3 pct, erases all gains post-QE3

By Vikram Subhedar

HONG KONG, Sept 26 (Reuters) - Hong Kong shares slipped on Wednesday, hit by profit-taking ahead of the quarter-end and as weak overseas markets and festering eurozone concerns kept investors wary of chasing this month's rally.

The Hang Seng index fell 0.9 percent to 20,514.32 by the midday break, with retailers bearing the brunt of pain. Esprit Holdings, which reported weaker-than expected annual results after the end of the morning session, was down 2.7 percent.

Profit margins in China and Hong Kong are expected to remain under pressure through the rest of the year with a mild recovery expected only next year, according to Credit Suisse.

"Any way we slice it, growth trends are sliding," said Credit Suisse analyst Karim Salamatian, the Hong Kong-based regional head of Credit Suisse's consumer research team.

The Hang Seng index is, however, still up 5.3 percent so far this month.

The China Enterprises index fell 1.4 percent while in China, the CSI300 of the top Shanghai and Shenzhen listings and the Shanghai Composite were both down 0.6 percent.

Both Hong Kong and China markets got off on a weak start after the S&P 500 suffered its worst day since June. Key to the declines were comments by Philadelphia Federal Reserve President Charles Plosser that questioned quantitative easing as a policy to counter sluggish economic growth and stubbornly low unemployment.

Protests in debt-laden Spain ahead of the planned announcement of a new round of austerity measures did little to enthuse investors back into stocks.

In Hong Kong, consumer-related stocks fell on relatively healthy volumes on an otherwise lacklustre day for trading.

High-end brands, jewelers and apparel makers were all weak as investors continued to take money off the table after the strong run-up in stocks this month.

In addition to Esprit, Prada SpA was down 1.4 percent while consumer goods exporter Li & Fung fell a 2.3 percent, extending this week's losses to 4.1 percent.

Hong Kong jewellers, a sector favoured by the brokerage partly due to low valuations, also fell on Wednesday with Chow Tai Fook Jewellery Group down 0.7 percent and rival Luk Fook Holdings off 1 percent.

A pullback in gold prices this week continued to weigh on mining companies with Zijin Mining off 1.8 percent in Shanghai and down 2.3 percent in Hong Kong.

BYD SLUMPS, HKEx ERASES POST-QE3 GAINS

Shares of Warren Buffett-backed BYD Co Ltd slumped 9 percent in Hong Kong trading after brokerage CLSA slashed its target price for the electric car maker.

In its report, CLSA maintained its "conviction sell" rating on the company and cut its target price on the stock to HK$0.41, suggesting a further 96 percent decline from current levels.

Rival Great Wall Motor, to whom CLSA believes BYD is losing market share, rose 2.5 percent in Hong Kong and 1.1 percent in Shanghai.

BYD shares had traded nearly two-and-a-half times their average daily volume by midday in Hong Kong. The company's Shenzhen listing fell 5 percent.

The drop off in overall market volumes continued to plague shares of Hong Kong Exchanges & Clearing which fell 2.3 percent and have now erased all gains following the launch of latest round of asset purchases by the U.S. Fed on Sept 13. (Editing by Edwina Gibbs)

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