March 5, 2012 / 4:55 AM / 5 years ago

Hong Kong, Shanghai shares slip after China douses growth hopes

(Updates to midday)

* HSI down 1.1 pct, Shanghai down 0.1 pct

* Chinese financials, growth-sensitive sectors weak

* More losses ahead if HSI dips below 20-day MA: analyst

* HK losses come as HKD at weakest in 2012, outflows possible

By Clement Tan

HONG KONG, March 5 (Reuters) - Hong Kong shares fell on Monday, led by Chinese financials and growth-sensitive sectors after China announced its lowest annual growth target in eight years sparking concerns of weak demand.

Coal stocks rose on the mainland, limiting the benchmark's losses. The Shanghai Composite Index closed down 0.1 percent at midday, with the highest midday turnover in four sessions.

Speaking at China's annual parliamentary session, Premier Wen Jiabao cut the country's 2012 growth target to 7.5 percent from the longstanding 8 percent, to find leeway for promised economic and welfare reforms ahead of a leadership transition later this year.

"It's clear from the sectors leading losses that Premier Wen's announcement is dousing expectations for growth and demand. There could be more losses if we break the 20-day moving average on the Hang Seng Index," said Jackson Wong, vice-president of equity sales at Tanrich Securities.

The China Enterprises Index of the top mainland listings in Hong Kong lost 1.9 percent, while the broader Hang Seng Index slipped 1.1 percent with turnover on the Hong Kong main board staying relatively lackluster.

The Hang Seng Index ended at 21,319.3 at midday, at the bottom of its trading range on the day, with market watchers suggesting more losses are possible .

Hong Kong shares also weakened after the Hong Kong dollar dropped to its weakest levels since the turn of the year, suggesting there were some outflows out of the territory.

China's largest banks were among the top drags on the benchmark indices. Industrial and Commercial Bank of China (ICBC) slipped 2.1 percent in Hong Kong and 0.7 percent in Shanghai.

ICBC's peers among the "Big Four" Chinese banks were also weaker despite ICBC's president downplaying speculation that the four banks lent less in 2012 so far.

China Construction Bank (CCB), Bank of China Ltd and Agricultural Bank of China (AgBank) lost 2.1, 1.2 and 1.3 percent in Hong Kong respectively.

Sun-Art Retail Group, among the largest hypermart operator in China, slumped 6 percent in midday volumes almost double its 30-day average after posting a sharp slowdown in its same-store sales growth in the second half of 2011.

DIVERGENCE IN CHINA COAL STOCK PRICE MOVEMENTS

In Shanghai, strength in coal stocks limited losses on the day after China issued a lower-than-expected raw coal output forecast that is sharply slower from a year ago, but expected to bolster coal prices in the mainland.

China Shenhua Energy Co Ltd, the mainland's top coal producer, was the top boost to the Shanghai benchmark, up 0.5 percent. Smaller peers, Panjiang Coal was up 3.5 percent in midday volume almost twice its 30-day average.

This was a marked divergence from Chinese coal stocks in Hong Kong, which were broadly weaker on the China's headline growth target. Yanzhou Coal lost 3 percent, while China Coal slipped 1.9 percent. (Additional reporting by Vikram Subhedar; Editing by Ramya Venugopal)

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