Hong Kong, China shares slide further, but up from day's lows

Fri Jun 21, 2013 1:11am EDT

Related Topics

* HSI -1.5 pct, H-shares -1.1 pct, CSI300 -0.9 pct

* Hong Kong indexes on track for worst week in a year

* China banks pare losses, cash crunch fears ease as money rates dip

* Galaxy Entertainment fall again after JP Morgan downgrade

By Clement Tan

HONG KONG, June 21 (Reuters) - Hong Kong and China shares pared hefty losses before Friday's midday break, as Chinese banking stocks recovered following speculation the central bank quietly added funds to the market, easing some fears of a broader banking crisis.

Traders said there was some fresh buying in the offshore Chinese market in some of this week's worst-hit sectors and firms with better balance sheets. Some short covering in index futures and exchange-trade funds (ETFs) also helped.

The Hang Seng Index ended the morning down 1.5 percent at 20,084.8 after falling below the 20,000-point mark and being about 2 percent off. The China Enterprises Index of the top Chinese listings in Hong Kong shed 1.1 percent.

The Shanghai Composite Index and CSI300 of the leading Shanghai and Shenzhen A-share listings each sank 0.9 percent. They are each down almost 5 percent on the week.

Both Hong Kong indexes were headed for their sixth-straight weekly loss and their worst week since May 2012, down 4.2 and 5.2 percent respectively. The H-share index was at its most technically oversold in 15 years, with its relative strength index standing at 17.7.

"The bigger picture still remains awful, there's no need to get too excited about some of the beta gains today," said Alex Wong, director of asset management at Ample Finance. He said he bought some long positions in high beta names and China telcos for their relatively better cash positions.

"The meltdown in the last few days has been quite violent and you have to remember some investors are still very underinvested, so it's more about pre-weekend positioning," Wong added.

China banks were broadly weaker in Hong Kong, but pared losses on the day after the overnight bond repurchase rate - a measure of the cost of cash - fell to 8.39 percent on a weighted average basis on Friday. That was down sharply from Thursday's close of 11.62 percent, but still more than double typical levels.

This was amid talk that the Chinese central bank had given "window guidance" to major state banks to offer cash, traders said. Helped by the speculation, midday Shanghai volume improved from Thursday.

Shares of Bank of Communication were down 3.4 percent in Hong Kong and 0.5 percent in Shanghai. China Minsheng Bank fell 4.9 percent in Hong Kong and 1.1 percent in Shanghai.

There were gains for some of the smaller Chinese banks listed in the mainland. Bank of Nanjing rose 2 percent in Shanghai after closing on Thursday at a six-month low. Everbright Bank rose 0.7 percent.

Shares of Macau casino operator Galaxy Entertainment dived 7 percent, falling further from Wednesday's record closing high after JP Morgan downgraded the stock from overweight to neutral.

Sector rival Macau Legend Development Ltd postponed an initial public offering expected to raise up to $786 million, sources said on Friday. This was the third deal to be delayed in Hong Kong in a month.

REBOUNDING FROM LOWS

In Hong Kong, some China coal miners, independent power producers and insurers were among the outperformers on the day. China Shenhua Energy climbed 2 percent, reversing losses after testing a four-year low.

New China Life Insurance (NCI) surged 5.8 percent to its highest in two weeks in Shanghai and rose 1.1 percent in Hong Kong. Central Huijin, China's state-owned investment company, bought into the insurer's A-shares last week.

Huijin said late on Thursday it recently added ETFs in the secondary market, adding to a statement on Monday that it increased its stakes in China's "Big Four" banks and last week's announcement of purchases in Everbright Bank and NCI.

The mainland's two benchmark indexes are now down about 9 percent in 2013, but outperforming offshore China peers with the Hang Seng China A-H Price Index briefly touching a one-year high. This suggests A shares are trading at the biggest premium over H shares since June 2012.

The H-share index is down 20 percent on the year. Short selling in Hong Kong accounted for 10.4 percent of total turnover by midday, lower than 15 percent on Thursday and 13 percent on Wednesday, but still above a historical 8 percent average.

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