Chinese shares lostearly gains to profit-takers on Monday, with worry over hugesupplies of new shares from IPOs offsetting the impact ofmarket-friendly central government measures on the mainland.
Some traders in Hong Kong started discounting expectationsfor positive Chinese economic data due out later this week, whichhad buoyed sentiment in the early session, and began focusing onthird-quarter company earnings.
The market will be watching out for the release of someearnings in the U.S. tonight, such as Intel, Johnson & Johnson,said Linus Yip, strategist at First Shanghai Securities.
Investors here will take their cue from the early trend in thosefigures and act on related or similar stocks that are listed herein Hong Kong. The benchmark Hang Seng Index .HSI slipped 200.09 points or0.93 percent to 21,299.35.
Turnover was down at HK$44.18 billion ($5.7 billion) fromFriday's HK$62.2 billion, when appetite for shares was especiallystimulated by debutant Wynn Macau (1128.HK). The China Enterprises Index .HSCE of top locally listedmainland Chinese stocks eased 0.96 percent to 12,375.93.
The momentum was not that strong. There was not enoughvolume to carry it through, Yip said. An early strong rally by Sinolink Worldwide Holdings(1168.HK) fizzled, sending the stock down 17.16 percent toHK$1.69, off a high of HK$1.88 in the early session.
The property developer said earlier that it was placingshares with Asia Pacific Promotion Ltd to raise HK$525 millionand boost its working capital.(heresehk/20091012/LTN20091012016.pdf) New World China Land (0917.HK) tumbled 7.3 percent to closeat HK$3.81 after it proposed a rights issue.
The Chinese propertyarm of New World Development (0017.HK) said late on Friday thatit planned to raise up to $683 million to refinance existingdebt.
JP Morgan downgraded New World China to underweight fromneutral, while Macquarie Securities downgraded the stock toneutral from outperform to take into account the dilutiveimpact of the rights issue. Asia Coal (0835.HK) trimmed its gains to 4.23 percent from apeak of 18.3 percent, ending at HK$0.370.
The coal producer hadagreed to acquire coal mines from Wonder Champion Investment Ltdfor $300 million as it cashes in on surging demand for coal.
A FLOOD OF SHARES China's key stock index closed 0.59 percent lower on Monday,led by Sinopec Corp (600028.SS), as huge supplies of new shares,including listed stocks freed up after the end of lock-upperiods, offset the positive impact of market-friendly governmentsteps.
The Shanghai Composite Index .SSEC finished at 2,894.483points, also hit by profit-taking pressure after Friday's nearly5 percent rise.
Sinopec closed down 1.61 percent at 11.60 yuan as 57 billionshares worth 670 billion yuan ($98 billion), or 66 percent of itstotal share capital, were converted to free float on Monday aftera lock-up period expired.
A monthly record of around 2 trillion yuan in non-tradeablestate and institutionally held shares are moving into free floatin October after the end of lock-up periods.
In addition, 19 companies are taking subscriptions forinitial public stock offerings this week, with 18 aiming to liston China's planned Nasdaq-style second board, ChiNext, which isexpected to be launched this month.
State media estimated the IPOs would attract a combined 1.6trillion yuan in subscription funds. The supply of new shares is too much, said Zheng Weigang,head of investment at Shanghai Securities.
Still, the indexshould have limited room to fall with the government's policysupport.
Zheng and other traders said they expected the index to findsupport at the 125-day moving average, now at 2,873 points. In positive news,China has formally relaxed rules on inboundportfolio investment, raising the maximum sum a single QualifiedForeign Institutional Investor (QFII) may invest to $1 billionfrom $800 million, the State Administration of Foreign Exchange(SAFE) said at the weekend.
Central Huijin, an arm of China's sovereign wealth fund,recently bought and would continue buying shares in China's threebiggest listed banks over the next 12 months, the lenders said on Monday.
The news pushed top lender Industrial and Commercial Bank ofChina (601398.SS) up 0.4 percent to 4.96 yuan, although it endedoff its intraday high because of weakness in the broader market. Overall trading was sluggish, although turnover of Shanghai Ashares rose to 99 billion yuan from Friday's 93 billion yuan.
Gaining stocks narrowly outpaced losers by 442 to 406. Loss-making Huda Technology (600892.SS) was the day's biggestloser, falling 4.97 percent to 14.35 yuan as investors expectedit to post a loss for the January-September results period,traders said.
Chinese companies are required to report theirearnings up to September before the end of this month. ($1=HK$7.75, 6.83 yuan)