China shares extend losses as IPOs divert funds, Hong Kong edges up

Thu Jun 19, 2014 12:56am EDT

* HSI +0.3 pct, H-shares -0.1 pct, CSI300 -0.5 pct

* China nickel firms sink as nickel prices slide

* CNOOC rises for a second day after LNG deal with BP (Updates to midday)

By Grace Li

HONG KONG, June 19 (Reuters) - China shares extended losses by midday on Thursday, as the lock-up of a sizeable amount of capital for initial public offerings continued to weigh on the markets.

Hong Kong shares rose slightly, buoyed by Wall Street's optimism after the U.S. Federal Reserve gave a positive assessment of the economy and committed to retaining accommodative monetary policy.

By midday, the Hang Seng Index was up 0.3 percent at 23,250.56 points. The China Enterprises Index of the top Chinese listings in Hong Kong held a soft tone, off 0.1 percent.

The CSI300 of the leading Shanghai and Shenzhen A-share listings and the Shanghai Composite Index each lost 0.5 percent and appeared on track for a third straight daily loss. The Shanghai benchmark stood at 2,045.49 points.

In the mainland, the first four Chinese companies pushed ahead with new listings after a four-month lull in IPOs, starting to take subscriptions on Wednesday with the aim of raising a combined 1.7 billion yuan ($273.80 million).

A fifth company - Ellington Electronics Technology - started to take IPO subscriptions on Thursday.

"The companies are selling their new shares at relatively low price-earnings ratios, so some investors are diverting money from existing holdings for the IPOs. We see strong demand in offline subscription," said Zhang Qi, a Shanghai-based analyst with Haitong Securities.

But Zhang added he did not expect a deep correction in the A-share market given the overall stable economy.

On Wednesday, Premier Li Keqiang said during his visit to Britain that China's economy would not suffer a hard landing and would continue to grow at a medium to high pace in the long term without strong stimulus.

Chinese Nickel companies were among the hardest hit in the morning, as prices for the base metal slid 2 percent with stocks on the London Metal Exchange surging to a fresh high.

Jilin Ji En Nickel Industry dived 7.9 percent and Chengdu Huaze Cobalt & Nickel Material 6.7 percent.

In Hong Kong, CNOOC gained 1.6 percent to its highest since Jan. 2. The stock rose a more moderate 0.4 percent on Wednesday after it announced a 20-year liquefied natural gas (LNG) deal with BP.

Chinese developers listed in Hong Kong were the biggest drags on the Hang Seng. China Overseas Land & Investment and China Resources Land shed 1.7 and 3 percent, respectively.

($1 = 6.2090 Chinese yuan) (Editing by Jacqueline Wong)

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