HK, China shares fall on earnings, asset bubble worries

HONG KONG, July 29 Hong Kong shares retreated 1.6 percent on Wednesday as profit-taking snapped a four-day rally and caution set in ahead of corporate earnings next week.

Shanghai shares fell 1.75 percent, led by property and metal stocks, on worries that banks may restrict lending to control risk as excessive liquidity threatens to fuel asset price bubbles.

The focus was on new listings China State Construction Engineering Corp (CSCEC) (601668.SS), whose $7.3 billion IPO last week was the world's largest in a year, and BBMG Corp (2009.HK), one of China's largest building materials manufacturers.

Analysts took note of the high level of liquidity attracted by IPO shares and expressed concern over stretched valuations.

Here are the index and top stock moves in both markets by midday -

HONG KONG

The benchmark Hang Seng Index .HSI fell 335.44 points to 20,289.10.

"The correction is in line with that in the mainland stock market, but underlying sentiment is still bullish, with money still flooding the market," said Conita Hung, head of equity research at Delta Asia Financial. "Those stocks that recently rose the most drew strong profit-taking interest but their outlook remains strong."

Hung forecast index support at 20,100 points.

The China Enterprises Index .HSCE, which represents top locally listed mainland Chinese stocks, was down 2.2 percent or 275.86 points at 12,148.72.

BBMG soared 65 percent to a high of HK$10.50 during its Hong Kong trading debut before easing to HK$10.20 by midday, failing to inspire a broader market advance.

Top refiner Sinopec Corp (0386.HK) dropped 4.3 percent to HK$6.83 after China trimmed retail fuel prices by a modest 3 percent, following two big increases last month that raised rates to their highest ever.

Asia's largest oil and gas producer PetroChina (0857.HK), which also has refining operations, lost 2.9 percent.

China COSCO Holdings (1919.HK) slid 5.2 percent after China's biggest shipping conglomerate said it expected to record a first-half loss as the recession battered the global shipping industry. It did not say when it would report its first-half results.

CC Land Holding (1224.HK) tumbled 9.7 percent to HK$5.94 after it said it would sell HK$2.53 billion (US$327 million) worth of shares at a discount to a major shareholder, raising capital to fund land acquisitions and property development.

Jiangxi Copper (0358.HK) retreated 5.8 percent to HK$16.80 after flagging a likely 57-64 percent fall in first-half profit from a year earlier on a substantial drop in product prices. [ID:nHKG256826]

China Strategic (0235.HK) climbed 11.29 percent on its plan to buy a controlling interest in an insurance company in the Greater China region.

SHANGHAI

The Shanghai Composite Index .SSEC ended the morning at 3,378.052, near its intraday low of 3,377.588 and poised to break a five-session winning streak.

Losing Shanghai A shares outnumbered gainers by 795 to 97. Turnover in Shanghai A shares rose to 143 billion yuan ($21 billion) from Thursday morning's 130 billion yuan.

China State Construction Engineering Corp (601668.SS) surged on its first day of trade to end the morning at 6.91 yuan, up 65 percent from its IPO price and exceeding analyst expectations.

Sichuan Expressway (601107.SS), which surged in its market debut on Monday in a frenzy of speculative buying, fell by its 10 percent daily limit for a second day in a row as investors locked in profit.

China's two biggest state banks, Industrial and Commercial Bank of China (601398.SS) and China Construction Bank (601939.SS) have set their 2009 lending targets at 1 trillion yuan ($146.4 billion) and 900 billion yuan respectively, giving them little room to lend further in the rest of this year, Caijing magazine reported.

China's banking regulator on Tuesday urged lenders to ensure that loans enter the real economy, rather than flow into property and stock markets for speculation.

Property stocks retreated on concern slower loan growth would make borrowing more difficult for developers and home buyers. China Vanke (000002.SZ), China's second-biggest listed developer, dropped 2.60 percent to 13.87 yuan, while Gemdale (600383.SS), a Shenzhen-based real estate company, slumped 6.02 percent to 18.89 yuan.

Steel prices tumbled, with Baoshan Iron & Steel (600019.SS), China's biggest listed steelmaker, down 3.09 percent at 9.11 yuan. The European Union passed a proposal to impose a 24 percent anti-dumping tax on Chinese steel wire rod imports for five years.

Other metal-related stocks also dropped, with Aluminum Corp of China (601600.SS) down 4.24 percent at 18.09 yuan. (Reporting by Nerilyn Tenorio in Hong Kong and Samuel Shen in Shanghai; Additional reporting by Donny Kwok; Editing by Chris Lewis)