Hong Kong shares slip, China inches to a fresh 7-1/2 mth high

Mon Jan 21, 2013 4:20am EST

* HSI -0.1 pct, H-shares +0.2 pct, CSI +0.6 pct

* HK turnover at to 2013 low, Shanghai volume improves

* China shipping rise after CSCL says 2012 profit expected

* ZTE sinks in Hong Kong after warning of 2012 loss

By Clement Tan

HONG KONG, Jan 21 (Reuters) - China shares climbed to another 7-1/2 month closing high on Monday, limiting Hong Kong losses, with the shipping sector strong after China Shipping Container Lines reported it expects a profit for 2012.

The Hang Seng Index closed down 0.1 percent at 23,590.9 after hitting on Friday its highest since June 1, 2011. The China Enterprises Index of the top Chinese listings in Hong Kong inched up 0.1 percent,

In the mainland, the Shanghai Composite Index rose 0.5 percent, while the CSI300 of the top Shanghai and Shenzhen A-share listings gained 0.6 percent to their respective highest since June 1, 2012.

Shanghai volume improved for a second-straight session, but was still some way off the year's highs. Hong Kong turnover was the lowest in 2013.

In Hong Kong, investors accelerated their switch away from Chinese railway stocks, some of which suffered a fourth straight loss on Monday.

"Chinese railway stocks were still weak today, there seems to be some mild rotation into the shipping sector today, but this could be short lived," said Edward Huang, equity strategist at Haitong International Securities.

"I still think Chinese airlines may be a better sector cyclical sector to rotate into, given the Chinese New Year peak season is round the corner. I don't think this is a good entry point for the shipping sector," Huang added.

The Chinese shipping sector was lifted on Monday after China Shipping Container Lines (CSCL) said on Friday that it expects to report a net profit for 2012 after posting a loss the year before.

Mainland media also reported on Monday that Beijing is working out a plan to help the sector involving tax and other financial support.

CSCL's shares jumped 3.9 percent in Hong Kong, but finished just shy of their close last Tuesday. It is now up 19.7 percent this year after jumping 26 percent in 2012. Its Shanghai shares surged the maximum 10 percent on Monday.

But Deutsche Bank's China shipping analyst said that CSCL's profit should still exceed expectations. CSCL is DB's top pick in the sector.

According to Thomson Reuters StarMine, DB's Sky Wu is the second-most accurate analyst in forecasting CSCL's earnings.

Also strong were China Vanke's A and B share listings in Shenzhen. They each soared the maximum-allowed 10 percent after the country's largest property developer by sales announced plans to be the second firm to leave the mainland's moribund B-share market.

Vanke's Shenzhen shares were trading on Monday for the first time since they were suspended on Dec. 26. Shares in Vanke's Hong Kong-listed subsidiary Vanke Properties Overseas Ltd , formerly known as Winsor Properties, surged 12.8 percent.

EARNINGS CONCERNS

The move for CSCL was one of a few driven by corporate earnings concerns, which are expected to dominate proceedings in the near term as investors see if the recovery in the world's second-largest economy translates into high company profitability.

ZTE Corp shed 1.4 percent in Hong Kong, but rose 1.7 percent in Shenzhen after China's second-largest telecom equipment maker issued a profit warning for 2012.

This contrasted with its larger rival, unlisted Huawei Technologies, which bounced back from a disappointing 2011 with a 33 percent rise in net profit for 2012, and forecast stronger revenue growth, buoyed by smartphone sales and cloud computing.

Chinese telcos were broadly weaker after China Unicom , the country's second-largest mobile provider, reported fewer 3G new subscriptions in December than in November.

In Hong Kong, China Unicom slipped 0.8 percent, while China Mobile inched down 0.4 percent and China Telecom shed 1.1 percent.

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