HK Shares Slip, Shanghai Suffers Worst Week in 2 mths

  on March 16 2012 11:16 AM

Hong Kong shares slipped on Friday but still ended up for the week as strength in some large caps on improving fundamentals offset days of weakness in Chinese developers after Premier Wen Jiabao doused hopes for eased property curbs.

The Shanghai Composite Index had its worst week in more than two months, slipping 1.4 percent, despite rising 1.3 percent on Friday in low turnover.

For the week, the China Enterprises Index of the top mainland listings in Hong Kong lost 0.4 percent while the Hang Seng Index rose 1.1 percent. On Friday, both indexes declined 0.2 percent.

China Overseas Land & Investment Ltd lost 4.7 percent and China Resources Land slumped 5.3 percent on Friday, bringing their weekly losses to 6.7 and 8.1 percent, respectively.

Investors had been betting that Beijing would relent on its aggressive policy position on the property sector with the world's second-largest economy slowing, but Wen dashed those hopes on Wednesday, reiterating that curbs would stay in place.

Alan Lam, Julius Baer's Greater China equity analyst, said Beijing is not going to budge on property curbs. I get a sense some foreign investors were very optimistic about aggressive policy easing on the sector, more so than mainland Chinese ones.

Chinese banks were also broadly weaker this week, due to fears of fund raising moves. However, Bank of Communications (BoComm) produced a rare gain in the sector on Friday, suggesting investors were taking well to its plan.

Shares of China's fifth-largest lender rose 2.1 percent on Friday, after BoComm said it would raise $8.9 billion to meet tighter capital requirements by placing shares with existing shareholders such as HSBC and the country's finance ministry.

I think most people are expecting Chinese banks, particularly the smaller, non-state owned ones, to be raising funds this year. BoComm's plan is perhaps the best they can muster, without diluting shareholders' stakes too much, said Lam.

LARGE CAPS LEAD GAINS ON STRONG FUNDAMENTALS

Galaxy Entertainment Group Ltd was among the top percentage gainers, climbing 6.6 percent. Volume was more than triple its 30-day average.

Credit Suisse analysts raised their target price for the Macau casino operator from HK$20.80 to HK$24.80, maintaining an outperform rating after Galaxy said on Thursday that 2011 profit more than tripled from the year before.

Li & Fung Ltd, manager of supply chains for retailers including Wal-Mart Stores Inc and Target Corp , rose as much as 7 percent before closing up 2.7 percent in more than double its 30-day average volume.

Friday's surge at Li & Fung came after a Goldman Sachs upgrade and more data suggesting the U.S. economy is gaining momentum.

The company's shares have surged by a third this year, largely on an improving U.S. economy and an expansion strategy aimed at diversifying its revenue sources.

Chinese internet Tencent Holdings Ltd extended gains, surging 3.9 percent on the day and 9.2 percent this week to its highest since early July.

Tencent reported on Wednesday a forecast-beating 43 percent jump in fourth-quarter revenue. For the quarter ending March 31, six analysts raised their earnings per share forecasts for Tencent by an average 3.7 percent, according to Thomson Reuters StarMine.

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