China shares rebound from 3-week low after PBOC move, Hong Kong gains

Tue Jul 30, 2013 12:35am EDT

Related Topics

* HSI +0.7 pct, H-shares +1.0 pct, CSI300 +1.4 pct

* Short-covering lifts banks after PBOC cash injection

* Yanzhou Coal dives after 2nd H1 profit warning in 3 mths

* Huaneng Power extends 2013 outperformance before earnings

By Clement Tan

HONG KONG, July 30 (Reuters) - China shares climbed from a three-week low on Tuesday, with Hong Kong markets also firmer, led by the banking sector after the Chinese central bank injected cash into the money markets for the first time since February.

The move eased some jitters of a repeat of last month's cash crunch, but a weak coal sector curtailed index gains after Yanzhou Coal issued a second warning in three months on its interim earnings ahead of the August reporting season.

Gains also came in relatively weak volumes, with investors marking time ahead of the outcome of a U.S. Federal Reserve policy meeting and China's official manufacturing managers' index (PMI) early on Thursday and Friday's U.S. jobs data.

At midday, the CSI300 of the leading Shanghai and Shenzhen A-share listings was up 1.4 percent, while the Shanghai Composite Index rose 1.1 percent. Both had closed on Monday at their respective lowest since July 9.

The Hang Seng Index rose 0.7 percent to 21,996.3 points, stymied by chart resistance at about 22,034, a near-two month intra-day high set last Friday. The China Enterprises Index of the top Chinese listings in Hong Kong gained 1 percent.

"The PBOC (People's Bank of China) cash injection was a positive today, but I don't think it will be anything more than a short-term lift for the Chinese banking sector," said Linus Yip, a strategist at First Shanghai Securities.

"The data points will be a key focus for the markets this week, but even then, I don't think there will be anything - not even the upcoming earnings season - that will alter anything too significantly that will trigger meaningful inflows," Yip added.

Yanzhou Coal dived 7.1 percent to HK$5.39 after the company said it expects to record a net loss of 2.35 billion yuan ($383.20 million)for the first half of 2013, citing sliding coal prices and unfavorable exchange rates. Its Shanghai listing slid 1.7 percent.

Losses in Hong Kong on Tuesday unwound a rebound for Yanzhou Coal in the last three weeks and pushed its share price below chart support at about HK$5.46, a level that had held since early July.

"The worst is not over yet for Yanzhou Coal or for the China coal sector," Goldman Sachs analysts said in a note to clients. "2013 is only the beginning of a multi-year down-cycle for the China coal industry, and see further margin squeeze and earnings pressure in 2013-15."

Shares of Huaneng Power climbed 1.5 percent in Hong Kong ahead of its interim earnings due later in the day.

Despite rising more than 12 percent largely on declining coal prices, its H-share listing is still trading at a 32 percent discount to its historic median 12-month forward earnings multiple, according to Thomson Reuters StarMine.

On the year, the Hang Seng Index is down 3 percent, while the CSI300 has slid 12.5 percent.

SCANT RELIEF FOR CHINA BANKS?

China Minsheng Bank shares jumped 2.8 percent in Shanghai as did other mid-sized Chinese lenders seen more reliant on short-term cash flows, after the Chinese central bank injected 17 billion yuan ($2.77 billion) in seven-day reverse bond repurchase agreements.

Short-term money rates in China have been rising steadily in recent weeks as the end of July approached and Chinese companies and banks stocked up on cash to make dividend payments and put books in order.

Gains on Tuesday lifted Minsheng's A-share listing from Monday's near seven-month closing low, while its H-share listing spiked 3.3 percent, largely on short covering.

A sub-index of China financials H-shares climbed 1.4 percent and another for CSI300 financial components jumped 2.6 percent.

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