* HSI +0.2 pct, H-shares -0.5 pct
* HK turnover weakest since September, minus last 4 sessions
* Esprit soars after UBS upgrade raises turnaround hopes
* China shut for 3-day Labor Day holiday
By Clement Tan and Yimou Lee
HONG KONG, April 29 China coal shares led losses
among commodity and industrial sectors in Hong Kong on Monday
after disappointing quarterly earnings doused recovery hopes,
capping broader market gains.
The benchmark Hang Seng Index ended up 0.2 percent at
22,580.8 points, as strength for index heavyweight HSBC Holdings
and Esprit Holdings after an upgrade left
the benchmark lingering at six-week closing high.
Esprit was a standout outperformer, jumping 4.8 percent to
its highest in three months, thanks to the upgrade from
"neutral" to "buy" by UBS analysts, who believe its turnaround
prospects have improved following more focused execution.
The China Enterprises Index of the leading Chinese
listings in Hong Kong slipped 0.5 percent. Excluding
holiday-reduced trading in the last four trading sessions of
2012, turnover was the weakest since September, the start of a
rally fuelled by U.S. quantitative easing.
Mainland China markets were shut for a three-day public
holiday and will only resume trading on May 2. Hong Kong also
will be closed on May 1.
"Some of the coal companies managed to disappoint reduced
earnings expectations and coal prices are still weak, so we're
likely to see more share price weakness from here," said Jackson
Wong, Tanrich Securities' vice-president for equity sales.
But some leading players in the Chinese coal, steel and
cement sectors may be better placed to outperform due to better
cost management as these sectors consolidate.
Shares of the mainland's largest coal producer, China
Shenhua Energy outperformed, shedding 0.7 percent
after it posted a 1.2 percent decline in quarterly net profit.
This is opposed to the 38 percent earnings decline recorded by
smaller rival China Coal Energy.
China Coal fell 6.2 percent on Monday.
Its weak results triggered a series of brokerage price
target reductions for the firm, with JP Morgan cutting theirs by
11 percent. They cited its rising gearing ratios as a near-term
concern after results showed the company was unable to maintain
stringent cost controls as it did the previous two quarters.
Goldman Sachs said Shenhua's diversified assets will
continue to help mitigate the impact from coal price weakness.
Goldman believes coal prices will stay weak through 2015 and
combine with inflation to squeeze the margins of Chinese coal
Conversely, China power producers were buoyed by lower coal
prices. Huaneng Power and China Resources Power
each climbed 1.8 percent on the day.
STEEL OVERCAPACITY WOES LINGER
The Chinese steel sector was also weaker despite signs of a
turnaround by Angang Steel after the China's steel
industry body warned its members on Saturday to rein in
expectations for the remainder of the year.
Angang dived 3.4 percent after China Iron and Steel
Association (CISA) officials said an anticipated increase in
demand would not be enough to justify big rises in production in
coming months. They added that the government was looking for
new ways to restructure the sector, which was still facing
Official data on Saturday showed industrial profits rising
5.3 percent in March from a year ago, compared with the 17.2
percent increase for the first two months. On the quarter,
industrial profits rose 12.1 percent.