Tech sector drags on Hong Kong stocks, H-shares outperform

Fri Apr 4, 2014 1:10am EDT

* HSI -0.3 pct, H-shares +0.2 pct, CSI300 +0.5 pct

* Tencent down 19 percent since March 3 peak

* CSI300 property sub-index stabilises

By Natalie Thomas and Chen Yixin

SHANGHAI, April 4 (Reuters) - Hong Kong shares were mixed on Friday, with gains in Chinese shares listed in the city overshadowed by tech losses and weighed by a sharp fall in Internet giant Tencent Holdings.

Mainland shares were up slightly by midday, but uncertainties over first quarter earnings results and concerns over the resumption of initial public offerings (IPO) left investors cautious.

By midday, the Hang Seng Index was down 0.3 percent at 22,507.58 points. The China Enterprises Index of the top Chinese listings in Hong Kong gained 0.2 percent.

The CSI300 index of the largest Shanghai and Shenzhen A-share listings was up 0.5 percent, while the Shanghai Composite Index was up 0.4 percent at 2,050.10 points.

Shares in index heavyweight Tencent fell 4.6 percent by the midday break as the stock followed U.S. listed counterparts, including Facebook Inc and SINA Corp into negative territory, on growing concerns that the sector as a whole is over-valued. Tencent was down as much as 6.3 percent in morning trade.

The Internet firm has lost 19 percent over the last 20 days of trading after reaching a peak of HK$646.00 on March 3.

Investors in Tencent are particularly sensitive to anything that might affect the stock while the People's Bank of China reviews its lucrative third party payment platform, analysts said.

"At this moment investors will be more cautious if the overall valuations in this sector seem to be too high. That's why after the tumbling in the U.S. tech stocks, the markets reacted on this news immediately," said Castor Pang, head of research at Core Pacific-Yamaichi in Hong Kong.

Software company Kingsoft also saw its share price fall for a second day, losing 4.9 percent by midday after it announced it would seek a U.S. listing for its Security software subsidiary Cheetah Mobile Inc.

H-shares had another positive day, with the sub-index on course for its best weekly performance since Feb. 21 on the news earlier this week that discussions are under way between the Hong Kong and Shanghai bourse to allow mainland investors to buy Hong Kong traded shares via Shanghai.

Mainland shares returned to positive form after property and banking shares stabilised, with almost all 16 listed banking shares gaining ground. Hua Xia Bank Co, Ltd and Industrial Bank Co Ltd were both up 1.1 percent by the lunch break.

The CSI300 property sub-index gained 0.5 percent by midday, with Hua Yuan Property Co, LTD jumping 8.9 percent and Yeland Group Co, LTD rising 8.2 percent.

But analysts said any major gains overall were unlikely while investors await news on IPO resumption.

"Even though some have been speculating on certain hot spots, the index still has little potential to rise further due to these uncertainties," said Cao Xufeng, head of research at Huaxi Securities in Chengdu. (Additional reporting by Alice Woodhouse; Editing by Jacqueline Wong)