* HSI +0.3 pct, H-shares -0.4 pct, CSI300 +0.1 pct
* Profit-taking knocks ChiNext off record high
* China South City at record high after Tencent investment
* China liquidity woes linger, PBOC skips open market ops
By Clement Tan
HONG KONG, Jan 16 Strength in Tencent Holdings
shares propped up the Hang Seng Index early on Thursday as
investors cheered the Chinese internet giant's HK$1.5 billion
($193.5 million) investment in logistics and warehouse firm
China South City Holdings.
Strong gains by the two stocks came as the broader Hong Kong
and mainland markets stayed sluggish. Liquidity worries lingered
after the People's Bank of China abstained from injecting funds
for a seventh straight scheduled open market operation.
"This liquidity issue in the mainland is going to persist,
at least until end-month, leading into the Chinese New Year,"
said Larry Jiang, chief investment strategist at Guotai Junan
"For stocks like Tencent, its expensive-looking valuation is
not too much of an issue with investors. They are looking to
build an empire that could likely surpass the likes of Amazon,"
At midday, the CSI300 of the biggest Shanghai and
Shenzhen A-share listing was up 0.1 percent, while the Shanghai
Composite Index was flat. The ChiNext Composite Index
of mainly technology startups listed in Shenzhen,
which closed at a record high on Wednesday, slid 1.1 percent.
The Hang Seng Index crept up 0.3 percent to 22,969.5
points, while the China Enterprises Index of the leading
offshore Chinese listings in Hong Kong slipped 0.4 percent.
Tencent, a major component on the Hang Seng
benchmark, climbed 3.1 percent to a record high and is now up
about 6 percent this year after surging 99 percent in 2013.
China South City spiked 54 percent on Thursday, also
to a record high.
Tencent is now trading at 35 times forward 12-months
earnings, a 29 percent premium to its historical median,
according to Thomson Reuters StarMine.
On Wednesday, Tencent said it had agreed to buy 680.3
million new shares in China South City, representing around 9.9
percent of that firm's enlarged share capital.
The investment in China South City pits it against Alibaba
Group Holding Ltd, the e-commerce group founded by
former English teacher Jack Ma, whose expected stock market
flotation could value it at more than $100 billion.
The rivalry between the two companies has ramped up in
recent months, with Alibaba pushing its own mobile messaging app
and setting up its own mobile gaming platform. Alibaba controls
about 80 percent of China's e-commerce sector.
Neway Valve (Suzhou) Co Ltd on Friday will
become the first new listing in the mainland after approvals
resumed earlier this month following a halt of more than a year.
With a backlog of more than 700 initial public offering
applications and about 50 approved so far, stock investors have
frowned at the prospect of increased competition for limited
funds. Larger offerings could lock up considerable amounts of
Shaanxi Coal Industry Co Ltd has slashed its IPO target by
more than half and now seeks to raise up to $660 million. The
move came amid regulatory pressure on listing companies to
ensure that the resumption of IPOs in China is not marred by
In Hong Kong, China Coal sank 3.2 percent, while
China Shenhua Energy shed 2.3 percent.
The China Securities Regulatory Commission said late on
Wednesday that it has begun inspections of IPO pricing behavior,
targeting 13 underwriters and 44 institutional investors.