(Updates to close)
* HSI +0.2 pct on the day, +2 pct this week
* CSI300 -0.2 pct on the day, +1.2 pct this week
* Rebound in early to mid stages, more cyclical rotation ahead: BoComm
* China Mobile slips ahead of Q3 earnings Monday
By Clement Tan
HONG KONG, Oct 19 (Reuters) - Hong Kong shares recorded a seventh-straight day of gains on Friday, as investors rotated into laggard growth-sensitive sectors on signs of a stabilising Chinese economy, powering the Hang Seng Index to a seventh-straight weekly gain as well.
Mainland Chinese markets edged lower on the day, trimming their third-straight weekly gain with Chinese companies expected to start posting third-quarter corporate earnings starting next week.
The Hang Seng Index rose 0.2 percent on the day and 2 percent this week to 21,551.8, equalling a winning streak recorded between December 2010 and January 2011. The benchmark is now just 1 percent shy of the 2012 intra-day high at 21,760.3, recorded on Feb. 20.
The Shanghai Composite Index and the CSI300 Index of the top Shanghai and Shenzhen listings each slipped 0.2 percent on Friday, but rose 1.1 and 1.2 percent, respectively, this week.
Mainland Chinese markets underperformed offshore peers for a second-straight week. The China Enterprises Index of the top Chinese listings in Hong Kong, or the H-share index, followed last week’s 3.8 percent gain with a 3.3 percent rise this week.
The Hang Seng Index A/H premium index ended this week under 100 for the first time since August last year, suggesting the premium that onshore shares trade over their offshore peers is now wiped out.
“We are still in the early to mid-stages of this rebound in Chinese equities, but next week’s earnings will be ugly and probably won’t be the catalyst for the next leg up,” Hong Hao, chief equity strategist at Bank of Communications (BoCom) International Securities, told Reuters.
Hong said investors will continue to rotate into growth-sensitive sectors that have been laggards and with cheap valuations.
“There is no reason to be too bearish, especially after data yesterday showed that domestic demand (in China) has held up reasonably well, putting a floor on the slowdown in the real economy,” he added.
The crucial role of domestic demand in China was underscored by data on Friday that showed foreign direct investment inflows fell 3.8 percent in the first nine months of 2012 from a year ago, extending the longest run of declines since the depths of the 2007-08 financial crisis.
A slowdown in overseas markets led the Ministry of Commerce to warn on Friday that exports, too, face an uphill battle despite better-than-expected September data.
CHINA‘S Q3 EARNINGS IN FOCUS NEXT WEEK
On Friday, Chinese discretionary consumer names were among the largest percentage winners. Shares of GOME Electrical Appliances, the second-biggest player in the sector, jumped 7 percent in heavy volumes, which traders said were due to several block deals.
GOME rose 9.5 percent this week, but is still down almost 50 percent in 2012 as investors hammered shares of China’s second-largest electrical appliance retailer as it waged an online price war, partly in an effort to clear inventories.
The Chinese cement sector continued its sharp ascent ahead of its third quarter earnings next week, starting with sector bellweather Anhui Conch Cement on Wednesday. On Friday, it rose 2.6 percent in Hong Kong and 2 percent in Shanghai.
In Hong Kong, it is up 17.8 percent this year, but is still trading at a 14 percent discount to its historic forward 12-month price-to-book value, according to Thomson Reuters StarMine.
China Mobile, is up 11.4 percent in 2012, compared to the and currently trading at a 7.6 percent discount to its forward 12-month earnings estimate, according to Thomson Reuters StarMine.”
China Mobile, the country’s biggest telco provider and a popular defensive counter, slipped 0.7 percent on the day to close the week up 0.2 percent. It is now down 1.6 percent ahead of its third-quarter earnings expected after markets close on Monday.
China Mobile is up 11.4 percent in 2012 and currently trading at a 7.6 percent discount to its forward 12-month earnings estimate, according to Thomson Reuters StarMine.”
In the last 30 days, five of 33 analysts have shaved their full year 2012 earnings-per-share estimate for China Mobile by an average of 0.3 percent, according to StarMine. (Additional reporting by Vikram Subhedar; Editing by Jacqueline Wong)