(Updates to close)
* HSI +0.2 pct on the day, +2 pct this week
* CSI300 -0.2 pct on the day, +1.2 pct this week
* Rebound in early to mid stages, more cyclical rotation
* China Mobile slips ahead of Q3 earnings Monday
By Clement Tan
HONG KONG, Oct 19 Hong Kong shares recorded a
seventh-straight day of gains on Friday, as investors rotated
into laggard growth-sensitive sectors on signs of a stabilising
Chinese economy, powering the Hang Seng Index to a
seventh-straight weekly gain as well.
Mainland Chinese markets edged lower on the day, trimming
their third-straight weekly gain with Chinese companies expected
to start posting third-quarter corporate earnings starting next
The Hang Seng Index rose 0.2 percent on the day and 2
percent this week to 21,551.8, equalling a winning streak
recorded between December 2010 and January 2011. The benchmark
is now just 1 percent shy of the 2012 intra-day high at
21,760.3, recorded on Feb. 20.
The Shanghai Composite Index and the CSI300 Index
of the top Shanghai and Shenzhen listings each slipped
0.2 percent on Friday, but rose 1.1 and 1.2 percent,
respectively, this week.
Mainland Chinese markets underperformed offshore peers for a
second-straight week. The China Enterprises Index of the
top Chinese listings in Hong Kong, or the H-share index,
followed last week's 3.8 percent gain with a 3.3 percent rise
The Hang Seng Index A/H premium index ended this
week under 100 for the first time since August last year,
suggesting the premium that onshore shares trade over their
offshore peers is now wiped out.
"We are still in the early to mid-stages of this rebound in
Chinese equities, but next week's earnings will be ugly and
probably won't be the catalyst for the next leg up," Hong Hao,
chief equity strategist at Bank of Communications (BoCom)
International Securities, told Reuters.
Hong said investors will continue to rotate into
growth-sensitive sectors that have been laggards and with cheap
"There is no reason to be too bearish, especially after data
yesterday showed that domestic demand (in China) has held up
reasonably well, putting a floor on the slowdown in the real
economy," he added.
The crucial role of domestic demand in China was underscored
by data on Friday that showed foreign direct investment inflows
fell 3.8 percent in the first nine months of 2012 from a year
ago, extending the longest run of declines since the depths of
the 2007-08 financial crisis.
A slowdown in overseas markets led the Ministry of Commerce
to warn on Friday that exports, too, face an uphill battle
despite better-than-expected September data.
CHINA'S Q3 EARNINGS IN FOCUS NEXT WEEK
On Friday, Chinese discretionary consumer names were among
the largest percentage winners. Shares of GOME Electrical
Appliances, the second-biggest player in the sector,
jumped 7 percent in heavy volumes, which traders said were due
to several block deals.
GOME rose 9.5 percent this week, but is still down almost 50
percent in 2012 as investors hammered shares of China's
second-largest electrical appliance retailer as it waged an
online price war, partly in an effort to clear inventories.
The Chinese cement sector continued its sharp ascent ahead
of its third quarter earnings next week, starting with sector
bellweather Anhui Conch Cement on
Wednesday. On Friday, it rose 2.6 percent in Hong Kong and 2
percent in Shanghai.
In Hong Kong, it is up 17.8 percent this year, but is still
trading at a 14 percent discount to its historic forward
12-month price-to-book value, according to Thomson Reuters
China Mobile, is up 11.4 percent in 2012, compared to the
and currently trading at a 7.6 percent discount to its forward
12-month earnings estimate, according to Thomson Reuters
China Mobile, the country's biggest telco provider
and a popular defensive counter, slipped 0.7 percent on the day
to close the week up 0.2 percent. It is now down 1.6 percent
ahead of its third-quarter earnings expected after markets close
China Mobile is up 11.4 percent in 2012 and currently
trading at a 7.6 percent discount to its forward 12-month
earnings estimate, according to Thomson Reuters StarMine."
In the last 30 days, five of 33 analysts have shaved their
full year 2012 earnings-per-share estimate for China Mobile by
an average of 0.3 percent, according to StarMine.
(Additional reporting by Vikram Subhedar; Editing by Jacqueline