China shares at 1-wk low as profit worries stall rally, HK edges up

Mon Oct 15, 2012 5:01am EDT

* HSI +0.1 pct, CSI300 -0.4 pct, Shanghai -0.3 pct

* ZTE, Angang Steel hit by profit warnings

* China data mixed, Q3 GDP on Thursday eyed

* Belle at 5-week low after disappointing sales (updates to close)

By Clement Tan

HONG KONG, Oct 15 (Reuters) - China shares slipped to a one-week low as profit-warnings stalled a rally driven by market-boosting steps from Beijing, despite inflation data released on Monday that showed the Chinese central bank has scope to ease monetary policy further.

Hong Kong shares barely held onto gains with the Hang Seng closing up 0.1 percent as weakness in Chinese retailers was offset by strength in local blue-chip property developers such as Henderson Land.

But profit warnings at the outset of the earnings season shoved onshore markets into negative territory, with the CSI300 Index of the top Shanghai and Shenzhen listings losing 0.4 percent, and the Shanghai Composite Index down 0.3 percent.

China's second-largest telecom equipment maker ZTE Corp and Angang Steel both warned on earnings.

Macro-economic data released in recent days painted a mixed picture with bank lending in September coming in weaker than expected, but export growth beat forecasts and inflation was benign in September.

"The profit warnings are a sign that China still needs to do more to support growth, but I think most people are expecting more fiscal than monetary measures," said Jackson Wong, Tanrich Securities' vice-president for equity sales.

Recent moves by Beijing have included the acceleration of infrastructure spending and the deployment of government funds to lift stakes in major Chinese banks.

"The main focus this week is China's Q3 GDP figure on Thursday. I don't think sentiment will change too much as long as it's in line with expectations," Wong said

Beijing will announce the official third-quarter growth figure later this week, expected at 7.4 percent -- which would mark a seventh straight quarter of slowing growth.

ZTE slumped 15.8 percent in Hong Kong and the maximum 10 percent in Shenzhen, both in heavy volume, after flagging a loss of as much as $279.2 million for the first nine months of the year.

Analysts at CICC downgraded ZTE shares to "hold" after the company, during a conference call with analysts on Sunday, cited delayed revenue from domestic and international markets as reasons for the loss.

Angang Steel lost 2.3 percent in Hong Kong and 1.1 percent in Shenzhen after the company warned late on Friday that it could make a loss of $505 million for the first nine months this year.

Belle International, China's leading foot- and sportswear retailer, slid 4.3 percent after announcing underwhelming same store sales growth in the third quarter.

The slump in Belle shares put them in negative territory for the year, down 0.2 percent in 2012 so far, compared to the 14.5 percent gain for the Hang Seng.

Analysts at UBS analysts maintained their "sell" rating on Belle's stock, saying same store sales could turn negative in the coming quarters. (Additional reporting by Vikram Subhedar; Editing by Simon Cameron-Moore)

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