China shares fall in sharp intra-day reversal, Hong Kong slips

Thu Jan 24, 2013 4:09am EST

* HSI -0.2 pct, H-shares -0.6 pct, CSI300 -1.0 pct

* Apple suppliers hit after tech giant's revenue miss

* Citic Securities, Foxconn slide after profit warnings

* New World Development at most overbought since Aug 2003

By Clement Tan

HONG KONG, Jan 24 (Reuters) - China shares ended lower on Thursday after a choppy session as investors took profit on recent outperformers, triggering a sharp intra-day reversal that left benchmark indexes vulnerable to further losses in the near term.

Weakness in mainland markets dragged on Hong Kong, with the Hang Seng Index down 0.2 percent to 23,598.9, pulling further away from chart resistance at about 23,708, the high on May 31, 2011.

The China Enterprises Index of the top Chinese listings in Hong Kong fell 0.6 percent, with only four components posting gains on the day. Bourse turnover slipped slightly from Wednesday, but stayed above $10 billion.

In the mainland, the CSI300 of the top Shanghai and Shenzhen listings ended down 1 percent, while the Shanghai Composite Index finished down 0.8 percent in bourse volume that spiked to its highest since Jan. 15.

"Technically speaking, this reversal doesn't look good for the A-share market...but it could spark some buying on dips," said Wang Ao-chao, UOB Kay Hian's Shanghai-based head of research.

Mainland markets had opened on a stronger note with positive manufacturing data lifting the mood although indexes reversed gains of as much as 2 percent in late morning with some traders citing news that North Korea would go ahead with its nuclear test plan.

But the muted reaction in other markets such as Japan and even Hong Kong suggested otherwise, with profit-taking in heavyweighted financials, which have raced up in recent weeks, having a bigger impact.

China Merchants Bank was the top drag on onshore indexes, falling 2.4 percent from its highest since May 2011 in Shanghai. It is still up more than 39 percent from a Sept. 20 nadir.

Shares of Apple Inc's suppliers were hit after Apple missed revenue expectations for a third straight quarter as sales of its flagship iPhone came in below Wall Street's expectations.

Hong Kong-listed AAC Technologies dived 6 percent to its lowest in more than a week and Shenzhen-listed Goertek , which supplies speakers to Apple, tumbled 5.8 percent to its lowest close since Dec. 19.

In Hong Kong, Citic Securities, China's largest listed brokerage, lost 2.8 percent after warning of a 66 percent decline in 2012 net profit, while Foxconn International shed 5.6 percent after warning of an annual loss.

China Mobile slid 2.2 percent to a two-month low after JP Morgan analysts downgraded its rating on the stock from "neutral" to "underweight," expecting the country's largest mobile operator to post its first negative year-on-year earnings change for 2013.

PROFITABILITY IN SHARP FOCUS

Bucking broader market weakness, Lenovo Group jumped 6.6 percent to its highest since November 2007 in Hong Kong after its chief executive told the Wall Street Journal in Davos that the company's smartphone business in China was already profitable.

Analysts were expecting Lenovo's smartphone business to at best break even in the first quarter this year. Shares of Lenovo have jumped more than 37 percent from a Sept. 5 low ahead of its third quarter corporate earnings due on Jan. 30.

Wharf Holdings climbed 2.1 percent after Citi analysts raised their target price for its stock by 25 percent.

They cited Wharf as their top pick among Hong Kong property-related conglomerates, given its best retail portfolio among peers and the impending start to the group's first major investment property project in China.

Citi also raised its target price for New World Development by more than 22 percent, sending its shares up 2.6 percent to its highest since November 2010. New World is now up 25 percent this year after surging 92 percent in 2012.

Gains on Thursday elevated New World's relative strength index (RSI) to its most overbought level since August 2003.