Hong Kong shares nudged off 21-month high, China tepid

Thu Jan 31, 2013 5:27am GMT

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* HSI -0.5 pct, H-shares -0.9 pct, CSI300 flat

* China steel, shipping sectors hit by profit warnings

* China Unicom, Datang Power issue positive earnings alerts

* Hengdeli falls again after negative media report

By Clement Tan

HONG KONG, Jan 31 (Reuters) - Hong Kong shares slipped from a 21-month high on Thursday, as investors turned cautious following a batch of profit warnings, knocking the Hang Seng Index off its most overbought levels in almost a month.

The Chinese steel and shipping sectors dominated the more than 10 profit warnings posted by Hong Kong-listed companies overnight, while mainland property developers slid after local media reported the Beijing city government submitted a property tax plan to the State Council for approval.

In the mainland, the Shanghai Composite Index inched up 0.1 percent, while the CSI300 of the top Shanghai and Shenzhen A-share listings was flat. Shanghai volume at midday stayed relatively robust.

The Hang Seng Index went into the midday trading break down 0.5 percent at 23,698.2, off Wednesday's 21-month closing high and back into the trading range that has bounded the benchmark since mid-January.

Losses on the day pulled the Hang Seng Index down from its most overbought relative strength index (RSI) value since the start of the year. The China Enterprises Index of the top Chinese listings in Hong Kong shed 0.9 percent.

"We ran a little ahead of ourselves in Hong Kong yesterday," said Alex Wong, director of asset management at Ample Finance. "At this point, investors are opting for earnings safety, so it's not helping shipping and steel names."

Shares of Angang Steel dived 3.5 percent in Hong Kong and 2.9 percent in Shenzhen to their lowest in a month after it estimated net 2012 losses at 4.2 billion yuan and warned its A-shares could be delisted following two straight annual losses.

Maanshan Iron and Steel plunged 5 percent in Hong Kong and 1.4 percent in Shanghai after warning of a record loss in 2012, while Metallurgical Corporation of China shed 2.9 percent in Hong Kong and 2.3 percent in Shanghai after warning of a 2012 net loss.

Aggravating jitters about steel, the China Iron and Steel Association (CISA) said on Thursday that 2012 profits reported by its members, which include more than 70 large steel mills, slumped 98 percent to 1.6 billion yuan ($257.2 million).

China Shipping Development Co Ltd tumbled 4 percent in Hong Kong after it warned of a sharp fall in 2012 net profit. Its larger bulk shipping rival China Cosco warned of a net loss earlier this week.

But in a rare positive earnings alert, Datang International Power rose 6.3 percent in Hong Kong and 2.2 percent in Shanghai after saying it expects 2012 net profit to more than double from the previous year.

Shares of China Unicom were also stronger, gaining 2.1 percent after the company said it expects 2012 net profit to rise more than 50 percent from a year earlier.

China Vanke fell 3.2 percent in Shenzhen, while Poly Real Estate tumbled 4.3 percent in Shanghai on fears that the imposition of property taxes in Beijing, one of China's largest cities, will hurt demand.

Rising home prices have elevated fears of more curbs on the sector, but Chinese property shares jumped on Wednesday as investors welcomed a domestic news report that the central government could tolerate up to 10 percent increases in home prices.

Hengdeli, China's top luxury watch distributor, fell a further 3.7 percent on Thursday despite a company statement reiterating no material changes in its business operations. On Wednesday, the stock plunged 13 percent following a report in Hong Kong-based Next magazine raising questions about its operations.

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