* HSI -0.4 pct, H-shares -0.3 pct, CSI300 -1.1 pct
* H-shares set for 4th monthly gain, A-shares headed for dim
* China banks sink after ICBC, BoCom earnings underwhelm
* China property jumps, relief that price measures stay
By Clement Tan
HONG KONG, Oct 31 Hong Kong and China shares
fell from one-week highs by midday on Thursday, with the Chinese
banking sector on the defensive following disappointing
quarterly earnings from two of the "Big Four" lenders.
Losses on the day trimmed October gains for Hong Kong while
sending mainland Chinese indexes into negative territory for the
month ahead of China's official October manufacturing purchasing
managers index reading on Friday.
"This batch of earnings is going to give China bears more
ammunition, doing little to curb the huge divergence of views on
the sector," said Larry Jiang, chief investment strategist at
Guotai Junan International Securities.
At midday, the Hang Seng Index, which closed on
Wednesday at its highest since Oct. 22, was down 0.4 percent at
23,211.6 points. The China Enterprises Index of the top
Chinese listings in Hong Kong was down 0.3 percent.
On the month, they are up 1.5 and 2.8 percent, respectively.
For the H-share index, this will likely be its fourth-straight
monthly gain, but it has struggled at a key technical level at
its 200-day moving average for much of October.
The CSI300 of the leading Shanghai and Shenzhen
A-share listings sank 1.1 percent, while the Shanghai Composite
Index shed 0.7 percent. Both had closed on Wednesday at
their highest in five sessions.
The indexes are down 1.2 and 1.3 percent, respectively, and
set for their first monthly losses in at least a quarter.
On Thursday, gains for the Chinese property sector helped
limit index losses. Poly Real Estate jumped 3.4
percent in Shanghai, while Shimao Property spiked 4.1
percent in Hong Kong.
China President Xi Jinping said late on Wednesday that the
country will increase the supply of land for homes and spend
more on affordable housing projects as the government steps up
efforts to stabilise a red-hot property market.
His comments spawned some relief that the central government
is sticking to supply-side measures for now, seen less
detrimental for the sector's profitability than demand-side
measures that Xi's predecessors favoured.
CHINA BANKING WOES
A slew of Chinese banks reported quarterly earnings after
markets shut on Wednesday, which Barclays banking analyst May
Yan described as divergent with the two biggest sector players
Losses came in spite of easing money rates in the mainland,
which had been a source of concern since late last week.
Industrial and Commercial Bank of China (ICBC)
slid 1.7 percent in Hong Kong and 0.3 percent in Shanghai after
the country's largest lender followed China Construction Bank
(CCB) in missing expectations with a 7.6
percent rise in third quarter net profit from a year ago.
The best performers this quarter, according to Barclays'
Yan, were Agricultural Bank of China and
mid-sized China Citic Bank , while Bank of
Communications and Minsheng Bank
were the worst.
Thinning loan margins and rising bad loans as the country's
economy slows from the supercharged pace of the last decade were
all cited as factors for the declining profitability of the
Chinese banking sector.
Despite still ranking among the world' most profitable
banks, raking in an average 13 percent profit growth in the
third quarter, the Chinese banking sector has been among the
most under owned despite trading at low valuations.
"In the short term, there are plenty of other macro
uncertainties that will drive the market. But this earnings
season will guide investors towards the better Chinese banking
names," Guotai's Jiang said.
"Some money is going to still have to rotate into Chinese
banks towards the end of the year simply because investors will
have to take profit on the outperformers and low valuations make
Chinese banks a cheap place to park for a while," Jiang added.