Hong Kong, China shares trim weekly gains, rail sector surges

Fri Jul 12, 2013 12:48am EDT

* HSI -0.4 pct, H-shares -0.3 pct, CSI300 -0.5 pct

* China on track for best week in 5 months, HSI sees 3rd weekly gain

* Belle climbs, Daphne plunges after contrasting Q2 signals

* China railway counters surge, investment to top $85 bln this year

* Asia Cement jumps on positive profit alert

By Clement Tan

HONG KONG, July 12 (Reuters) - China shares looked to end their best week in five months on a whimper, with Hong Kong also weaker, as investors on Friday trimmed gains in recent outperformers ahead of more China economic data that could disappoint.

Encouraging statements from Chinese Premier Li Keqiang triggered a broad rally in both markets this week on hopes for economic stimulus following anemic data. Tentative signs of support for sectors plagued by overcapacity emerged on Friday.

At midday, the Shanghai Composite Index and the CSI300 of the leading Shanghai and Shenzhen A-share listings were both down 0.5 percent. But for the week, they were up 2.7 and 3.9 percent, respectively, and on track for their best week since the one ended Feb. 1.

The Hang Seng Index edged down 0.4 percent to 21,353.7 points, but was poised for a third-straight weekly gain, up 2.4 percent. The China Enterprises Index of the top Chinese listings in Hong Kong shed 0.3 percent, but was still up 3.5 percent this week.

Some people missed the rally over the past two days, "but we have had quite a violent selloff in the weeks before that and some of the buying interest was bound to return," said Linus Yip, a strategist at First Shanghai Securities.

"Confidence is returning after Li Keqiang's comments, but things are stablising, not turning bullish. Much will now depend on what Beijing rolls out. Earnings visibility will continue to be rewarded, investors won't mind paying a premium for that," Yip added.

Beijing is due to release second-quarter GDP growth data on Monday, along with monthly urban investment, industrial output and retail sales figures. June money supply and loan growth data is also due by July 15.

China's finance minister signalled that Beijing may be willing to tolerate second half economic growth significantly below 7 percent, the most sobering comment to date on the country's slowdown from a senior policymaker.

In a sign that big divergence may surface within sectors at the upcoming interim results reporting season, shoe retailer Belle International climbed 4.3 percent after its same store sales growth for the second quarter slowed to 0.5 percent, bettering expectations.

Rival Daphne International plunged 13.2 percent in heavy volumes to its lowest since August 2009 after warning of a "meaningful decline" in first half profit as second quarter same-store sales dived 13.7 percent from a year earlier.

The Chinese banking sector was hurt by a report in the official China Securities Journal that Beijing may scrap the official floor under banks lending rates as the first major step to liberalise its interest rate regime, a move that could hurt short-term net interest margins.

In Hong Kong, Industrial and Commercial Bank of China , the country's biggest lender, shed 0.4 percent, while mid-sized lender China Minsheng Bank fell 2 percent.

OVERCAPACITY, POLICY, STIMULUS?

On Friday, Asia Cement climbed 7.6 percent after becoming the second Chinese cement producer in two days to put out a positive profit alert.

China Resources Cement, the first with a positive alert, followed Thursday's 10.6 percent surge with a 1.6 percent rise on Friday. China National Building Material jumped 3.4 percent.

Cement also swayed by a report in the 21st Century Business Herald, citing unidentified officials, that China could invest in railway construction to absorb some overcapacity in the steel and cement sectors.

China Railway surged 8.5 percent in Hong Kong and 3.2 percent in Shanghai after that report suggested mainland rail investment this year will be about 520 billion yuan ($84.76 billion).

CSR Corp spiked nearly 10 percent in Hong Kong and 4.1 percent in Shanghai after the official Shanghai Securities News reported the company won subway building contracts.

The shipping sector failed to take any cheer from a China Daily report that Beijing is considering a package of regulatory measures to protect the struggling domestic shipping industry against foreign competitors suspected of malicious price manipulation.

China Rongsheng, the largest private shipbuilder, which asked Beijing and major shareholders for financial help last week, slid 2.4 percent in Hong Kong.