Hong Kong, China shares up for 1st time in 4 days; turnover weak

Thu Nov 29, 2012 12:38am EST

* HSI, H-shares +1.1 pct; CSI300 +0.2 pct

* China banks, property, Tencent lead HK rebound

* Chow Tai Fook up 4.5 pct ahead of interim earnings

* Geely, Sunac dive after block sales priced at discounts

By Clement Tan

HONG KONG, Nov 29 (Reuters) - Hong Kong and China shares rose for the first time in four days on Thursday, after a prominent U.S. lawmaker raised hopes of a deal to resolve the U.S. fiscal policy standoff, but turnover was weak, pointing fragile confidence in the market.

U.S. House of Representatives Speaker John Boehner voiced optimism that Republicans could broker a deal with the White House to avoid year-end austerity measures, just one day after comments from U.S. Senate Majority Leader Harry Reid dented hopes of a deal late on Tuesday.

The Hang Seng Index and the China Enterprises Index of the top Chinese listings in Hong Kong both went into the midday trading break up 1.1 percent.

"It's not the best time to be making big positional changes now. Most investors are waiting for policy guidance on the structural reforms the Chinese leadership has been talking a lot about," said Alan Lam, Julius Baer's Greater China equity analyst.

On the mainland, the CSI300 Index of the largest Shanghai and Shenzhen listings rose 0.2 percent, while the Shanghai Composite Index edged up 0.1 percent from its lowest closing level since January 2009 set on Wednesday.

Shanghai volume neared lows for the year, Hong Kong turnover at midday was its lowest in nearly four weeks.

Lam said sectors such as Chinese property and Internet-related names such as Tencent Holdings present greater earnings clarity in the near to medium term.

On Thursday, Tencent rose 0.9 percent, recovering from losses in the first three days of the week. It is now up 64 percent on the year, compared to the 19 percent gain on the Hang Seng Index and a 5.8 percent rise on the China Enterprises Index.

China Resources Land, one of two pure China property components on the Hang Seng Index, went into the midday break up 3.5 percent after earlier testing its highest intraday level in more than three years.

The Chinese banking sector was among the biggest index movers in Hong Kong, also recovering most of losses made earlier in the week. China Construction Bank rose 2.1 percent, while Industrial and Commercial Bank of China gained 1 percent.

The liquor sector was among the bigger index boosts on the mainland after a contamination scare involving Jiugui Liquor last week. Jiugui slipped 3.1 percent in Shenzhen, but sector heavyweights Wuliangye rose 0.8 percent and Kweichow Moutai inched up 0.3 percent.

A-share weakness this week has dragged the Hong Kong market down all week, but in sign that domestic Chinese retail investors could be preparing a return, the state-run China Securities Journal newspaper reported that stock trading accounts saw the first net inflow from bank accounts last week, the first since the start of November.

HOW TO PLAY CHINA STRUCTURAL REFORMS

In their preview of the Chinese stock markets for 2013, Goldman Sachs strategists said less volatility in China's GDP growth will see the market shift focus from cyclical to structural reform plays.

They reiterated mass market consumption as a theme for the new year, expecting it to be supported by a policy focus on safety nets and a reduction of wealth disparity.

Chow Tai Fook, the China-focused jewelery retailer, which is the world's biggest by market cap, rose 4.5 percent ahead of its interim earnings expected after the market close on Thursday. It is up 12.6 percent this month.

But a strong move against corruption by China's new leadership would be negative for some consumer discretionary names, said Julius Baer's Lam. Luxury brands such as Chow Tai Fook, could suffer.

Eight of 24 analysts have downgraded their full year earnings-per-share estimates for Chow Tai Fook by an average of 17.4 percent in the last 30 days, according to Thomson Reuters StarMine.

Chinese automaker Geely Automobile declined 2.2 percent to HK$3.50 after Goldman Sachs Principal Investment Area launched an up to $262 million selldown in an indicative range of HK$3.30 to HK$3.40 each.

Property developer Sunac China Holdings lost 2.1 percent to HK$4.75 after local press reported Bain Capital offered shares at HK$4.42 to HK$4.50 each, an up to 8.9 percent discount to its Wednesday's closing price.

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