* HSI down 1.5 pct, CSI300 slips 0.2 pct
* HK turnover best in more than three weeks
* Lenovo hit by NEC stake sale, ends below deal price range
* Minsheng Bank dives, JP Morgan adds to downgrade gloom
By Clement Tan
HONG KONG, Sept 5 Hong Kong shares suffered
their worst day in more than six weeks on Wednesday, dragged by
the growth-sensitive Chinese banking and energy sectors after
brokerage downgrades and falling coal prices compounded fears of
an anemic mainland economy.
China Minsheng Bank lost almost 4
percent each in Hong Kong and Shanghai, hit by a JP Morgan
downgrade on concerns that it could suffer more than state-owned
banks because of its dependence on corporate deposits.
Mainland Chinese markets were also weaker, hovering at their
lowest levels since early 2009, but outperforming Asia peers on
strength in property developers after local media reported
Beijing is unlikely to unveil more sector curbs to avoid
worsening the slowdown.
Shenzhen-listed China Vanke, the country's
largest real estate developer by sales, rose 1.1 percent after
it posted an 8 percent rise in August sales from the same period
a year ago.
The CSI300 Index of the top Shanghai and Shenzhen
listings slipped 0.2 percent, closing at its lowest since March
2009. The Shanghai Composite Index lost 0.3 percent,
while the China Enterprises Index of the top Chinese
listings in Hong Kong declined 1.6 percent.
The Hang Seng Index ended down 1.5 percent at
19,145.1, its worst daily loss since July 27. It finished below
chart support at 19,162.3, the top end of the gap formed between
a July 26 high and a low the following day, suggesting more
weakness could be in store.
"Investors largely have a better sense of the risks
associated with Europe and the U.S., but not so with China,"
said Wang Ao-chao, UOB Kay Hian's Shanghai-based head of China
Chinese PC maker Lenovo, the world's
second-largest name by sales in the sector, slumped 7.5 percent
to HK$6.18 after Japan's cash-strapped NEC Corp sold
its entire stake in the Chinese PC maker in a deal worth 18
billion yen ($229.6 million).
Wednesday's losses took Lenovo shares below HK$6.30, the
lower end of the range at which the deal was priced, suggesting
investors were expecting further weakness in the stock despite
having posted favourable first half earnings in mid
"Confidence is clearly lacking. The way Lenovo is trading
today after the block deal points to that," Wang said.
Since hitting a post-earnings high on Aug. 17, Lenovo's
share price has steadily declined. It has lost 12 percent since
then, but is still up 18 percent for the year.
Lenovo's block deal helped prod Hong Kong bourse turnover to
its highest since Aug. 14. There was another block deal
involving Chinese auto maker Brilliance, but trading
in its shares was suspended on Wednesday.
AIA Group inched up 0.2 percent ahead of a
possible $7.6 billion stake sale by American International Group
after its lockup expired on Tuesday. Sources told
Reuters last week the U.S. insurer is expected to offload its
COAL, BANKING SECTORS TAKE BRUNT OF CHINA FEARS
Chinese coal producers were weak after reports that Shandong
coking coal price dropped 10 percent last week on weak demand
and high inventories. Nomura analysts said this suggests price
recovery projections for the fourth quarter may not be as rosy
Yanzhou Coal dived 6.2 percent in Hong Kong, while
leading industry player China Shenhua Energy Co Ltd
lost 4.1 percent in Hong Kong and 1.9
percent in Shanghai.
Minsheng Bank was the standout underperformer among Chinese
banks. Traders said margin calls aggravated losses on the day
for its stock in Hong Kong, which closed at its lowest since
October last year.
JP Morgan analysts downgraded its stock from "overweight" to
"neutral" and cut their target price by 22 percent. This
followed a similar downgrade by Credit Suisse on Tuesday.
Minsheng has now lost more than 10 percent in Hong Kong this
"Asset quality is now deteriorating across the China banking
sector, and rate cuts and deposit competition continue to
squeeze net interest margins," said JP Morgan analysts led by
Josh Klaczek in a note.
"In this environment, performance favors defensive balance
sheets with excess capital and/or liquidity, two areas where
Minsheng is constrained," they said.
In a note on Wednesday, Bernstein analysts said concerns
over the Chinese banking sector's asset quality were also driven
by a sharp 29 percent increase in overdue loans in the first
half from the previous half.