Hong Kong shares baulk at resistance levels, China climbs

Wed Jan 23, 2013 4:14am EST

* HSI -0.1 pct, H-shares -0.3 pct, CSI300 +0.4 pct

* HSI fails at 23,708 chart resistance in early trade

* AIA bucks trend as investors opt for earnings safety

* Li Ning slammed by renewed inventory woes

By Clement Tan

HONG KONG, Jan 23 (Reuters) - Hong Kong shares slipped on Wednesday as investors took profits on growth-sensitive outperformers after benchmark indexes faltered at chart resistance levels after a strong start to the year.

The Hang Seng Index ended down 0.1 percent at 23,635.1 points, after failing to hold above chart resistance at about 23,708, the high on May 31 and June 1, 2011. The benchmark had closed on Tuesday at its highest since those dates.

The China Enterprises Index of the top Chinese listings in Hong Kong 0.3 percent as bourse turnover hit its highest in almost two weeks.

In mainland China markets, the CSI300 of the top Shanghai and Shenzhen A-share listings rose 0.4 percent, while the Shanghai Composite Index gained 0.3 percent. Both reversed midday losses to close near 7-1/2 month highs.

The indexes have bounced 24 and 18 percent, respectively, from a Dec 3 low as investors grow more convinced that China's economy is regaining momentum. The Hang Seng and China Enterprises indexes have rallied about 9 and 16 percent, respectively, over the same time period.

"We have risen by quite a bit in a very short time, so investors have been taking some profits in the last week or so, looking for new ideas to rotate into," said Larry Jiang, chief strategist at Guotai Junan International Securities.

On Wednesday, shares of Chinese sportswear brand Li Ning tumbled 5.3 percent after a Hong Kong media report said the sector still faces inventory issues, slipping further from Monday's near 9-month closing high.

The report said one outlet was selling items with discounts of up to 90 percent. Despite a second-straight loss on Wednesday, Li Ning shares are still up almost 69 percent from a Sept. 5 low.

Chinese railway counters were also weak. China Railway Construction (CRC) and China Railway Group (CRG) both posted their sixth-straight loss. They started 2013 where they left off in 2012, but losses in the last week have prodded them into negative territory for 2013.

In Hong Kong, CRC dived 3.5 percent, while CRG shed 1.6 percent to its respective lowest close since late November. In Shanghai, CRC shed 2.4 percent while CRG slid 0.9 percent.

But there were still gains in growth-sensitive sectors, with leading players expected to benefit from an acceleration in mergers and acquisitions in nine industries, including steel and rare earths. China's top economic planning agency had issued guidance on sector consolidation on Tuesday.

Angang Steel rose 1.8 percent in Hong Kong and 1.2 percent in Shenzhen, while Inner Mongolia Baotou Steel Rare-earth Group climbed 2.1 percent in Shanghai.

EARNINGS SAFETY FIRST

Investors also rotated into defensives and laggards which are unlikely to disappoint in the upcoming earnings reporting season, as profit warnings start to accumulate.

Asian insurer AIA Group continued its bounce from Monday's one-month low, rising 1.8 percent. Goldman Sachs said in a note dated Jan 23 that strong sales in Thailand in the last quarter could help AIA trump profit expectations.

Over the last 30 days, two out of 20 analysts following the stock have upgraded their earnings-per-share estimates for AIA by an average of 4.8 percent, according to Thomson Reuters StarMine.

China Minsheng Bank extended gains after advising over the weekend of a better-than-expected 34.5 percent rise in full year 2012 net profit. Its shares jumped 3 percent in Hong Kong, while spiking 3.6 percent in Shanghai.

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