Hong Kong shares lifted by coal, cement; China slips

Wed Jul 17, 2013 12:46am EDT

* HSI +0.2 pct, H-shares +0.8 pct, CSI300 -0.8 pct

* China coal counters spike on favourable H1 operation data

* China property hit by prospect of tax expansion

* Luk Fook jumps on Q2 same store sales growth

By Clement Tan

HONG KONG, July 17 (Reuters) - Hong Kong shares look set for a third daily gain, lifted by strength in Chinese coal and cement counters as investors rushed to cover short bets after favourable June coal sales and a major cement producer sold assets to its parent company.

Mainland Chinese markets slipped on Wednesday, with the property sector again a key weakness after the country's tax administrator said late on Tuesday that it was studying a nationwide expansion of a real estate tax pilot.

By midday, the CSI300 of the leading Shanghai and Shenzhen A-share listings was down 0.8 percent, while the Shanghai Composite Index slipped 0.4 percent. Both have been trapped in a 40-70 point range for almost a week.

The Hang Seng Index rose 0.2 percent and appears set for a third day of gains, while the China Enterprises Index of the top Chinese listings in Hong Kong climbed 0.8 percent. Turnover stayed weak.

"There are quite a few news items today, triggering some rotation from some recent outperformers into cyclical names," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong.

"Some of these cyclicals counters are among the most beaten up and are currently trading at big discounts. Going into the August earnings season, some of them present good trading opportunities," Yip added.

Shares of China Shenhua jumped 5.6 percent in Hong Kong to its highest in three weeks after posting a solid operating performance in the first half of the year as coal sales grew 9.3 percent in June from a year earlier. Its Shanghai listing climbed 1.5 percent.

With its H-share listing still down nearly 36 percent on the year, Shenhua is currently trading at 7.1 times forward 12-month earnings, a 44 percent discount to its historical median, according to Thomson Reuters StarMine.

Anhui Conch Cement spiked 5.9 percent in Hong Kong and 4.4 percent in Shanghai after China's largest cement producer sold production assets to a subsidiary of its parent company. Cement production in China grew 9.8 percent in June, which UBS analysts say is the fastest pace this year.

UBS also said the pace of new capacity additions is slowing down, which along with a mild recovery in demand, will help ease the problem of excess cement supply in China and improve capacity utilisation.

Chinese state television had reported late on Tuesday Premier Li Keqiang as again saying that Beijing will not easily deviate from pushing reform as long as growth falls within the official comfort zone - comments that mildly bolstered sentiment.

On Wednesday, the Commerce Ministry said measures to support exports and imports will soon be released following anemic June trade figures last week. Data on Wednesday showed direct foreign investment increased 4.9 percent in the first half from a year ago.

Luk Fook Holdings jumped 3.6 percent after the jewellery retailer said same store sales surged 83 percent in Hong Kong and Macau and 117 percent in the mainland in the first quarter, lifting its jewellery sector rivals.

Investors rotatated out of the outperforming Chinese auto sector on Wednesday. Great Wall Motor fell further from Monday's one-month high, diving 4.2 percent. It is still up 45 percent on the year, compared to a nearly 6 percent loss on the Hang Seng Index and 17 percent dive on the H-share index.

The Chinese property sector was again weak. China Vanke , the country's largest property developer by sales, tumbled 2 percent in Shenzhen, while China Resources Land slid 1.2 percent in Hong Kong and is now down almost 4 percent on the week.

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