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Hong Kong shares rooted at 5-month lows, China sluggish too
January 28, 2014 / 5:00 AM / 4 years ago

Hong Kong shares rooted at 5-month lows, China sluggish too

* HSI +0.1 pct, H-shares flat, CSI300 -0.1 pct

* Trust product bailout buoys Chinese banks

* Apple suppliers sink after weaker-than-expected forecast

* Huaneng Power, China Life Insurance fall despite profit alerts

By Clement Tan

HONG KONG, Jan 28 (Reuters) - Hong Kong shares lingered at five-month lows early on Tuesday, with mainland Chinese markets also sluggish as many investors remained jittery ahead of key central bank meetings in the United States and Turkey.

The Chinese banking sector broadly rebounded after China Credit Trust said an agreement will avert a possible trust default. Apple Inc suppliers tanked after the company reported lower-than-expected holiday iPhone sales and a weak revenue forecast.

At midday, the Hang Seng Index was up 0.1 percent at 21,996.2 points, while the China Enterprises Index of the leading Chinese listings in Hong Kong was flat. Both closed on Monday at their lowest since end-August.

Losses in the three sessions before Tuesday took about 5 percent off the Hang Seng and H-share indexes.

The CSI300 of the leading Shanghai and Shenzhen A-share listings slipped 0.1 percent, while the Shanghai Composite Index inched up 0.1 percent. Both briefly tested their weakest intra-day levels in a week.

“The deal to avert default is a source of relief for many, but it’s a clear warning on the scale of the risks that still remain with other trust products due to mature this year,” said Jackson Wong, Tanrich Securities’ vice-president for equity sales.

The U.S. Federal Reserve kicks off its two-day policy meeting later in the day and could decide to further scale back its bond-buying programme. Investors are also watching what the Turkish central bank might do to defend its currency.

On Tuesday, mid-sized lender China Minsheng Bank rebounded 4.2 percent in Hong Kong after closing on Monday at its lowest since July 4. Its Shanghai listing rose 1 percent.

The sector was also buoyed by a 150 billion yuan injection in 14-day reverse repos by the Chinese central bank on Tuesday at its first of two weekly scheduled open market operations. This eased fears of a cash crunch ahead of month-end and the Lunar New Year holiday, which starts Friday.

Still, in a sign of how much the slowdown in the world’s second-largest economy is affecting Chinese banks, shareholders at another mid-sized lender, CITIC Bank agreed to more than double bad-loan writeoffs for 2013.

Investors also returned to the sectors that outperformed in the last year, such as Macau casinos and Chinese technology. Galaxy Entertainment rose 3 percent, while Tencent Holdings jumped 3.4 percent.

Lenovo Group surged 5.1 percent after research firm IDC said the company ranked fifth-largest in the global smartphone market. For the industry, global shipments topped 1 billion units for first time in 2013, climbing 38.4 percent from the previous year.


There were losses for Chinese power producers and Chinese insurers after key firms issued profit alerts that fell short of expectations, suggesting the coming earnings season could limit gains.

Huaneng Power dived 5 percent in Hong Kong and 2.2 percent in Shanghai after a profit alert expecting 2013 net profit to increase by at least 75 percent. Credit Suisse analysts said this implies profit that could be 13 percent below consensus expectations.

China Life Insurance shed 1.4 percent in Hong Kong after saying it expects 2013 net profit to jump 120 percent from a year earlier. Deutsche Bank analysts say these numbers alluded to a soft fourth quarter, but they expected an improved outlook later this year.

There were losses for Apple suppliers after the company forecast sales of $42 billion to $44 billion this quarter, brisker than usual, but short of Wall Street expectations for $46 billion, on average.

Hong Kong-listed AAC Technology and Shenzhen-listed Goertek each fell more than 5 percent.

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