* HSI slips 0.5 pct on the day, down 1.9 pct on the week
* CSI300 up 0.1 pct on Friday, jumps 3.1 pct this week
* PetroChina at lowest close in 4 mths after earnings miss
* China funds have 4th week of net outflows: Citi, EPFR
By Clement Tan
HONG KONG, March 22 China shares closed out
their best week in nearly two months on a tepid note on Friday
ahead of a slew of earnings due from bellwether companies that
will offer clues on how they are adapting to the country's
changing economic landscape.
Onshore Chinese markets outperformed offshore peers again
this week as Hong Kong benchmarks posted a second-straight
weekly loss. A-shares are now trading at their biggest premium
over H-shares in more than six months.
The CSI300 of the leading Shanghai and Shenzhen
A-share listings closed a choppy Friday session up 0.1 percent,
while the Shanghai Composite Index crept up 0.2 percent
as bourse volume dipped 15 percent from Thursday.
On the week, these onshore indexes jumped 3.1 and 2.2
percent, respectively, compared with the 1.9 percent slide for
the Hang Seng Index and the 1.1 percent loss for the
China Enterprises Index of the top Chinese listings in
The Hang Seng Index slipped 0.5 percent and the China
Enterprises Index eased 0.4 percent on Friday, as Hong Kong
turnover sank to the lowest in two weeks and was some 17 percent
below its average in the past month.
"A lot of companies have so far reported earnings broadly in
line with expectations," said Peter So, co-head of research at
CCB International Securities.
With investors still divided on the pace of earnings
recovery, they are more likely to reward companies able to
generate more immediate returns on new capital expenditure, So
According to Thomson Reuters StarMine, 43 percent of Hong
Kong-listed companies have reported earnings, and almost half of
those missed expectations.
PetroChina sank 1.4 percent to its
lowest close since end-November in Hong Kong after it reported a
steeper-than-expected 13.3 percent drop in 2012 net profit on
Thursday, due in part to ballooning losses at its natural gas
In a note on Friday, Morgan Stanley analysts said a
combination of rising gearing, huge capital expenditure and
relatively slow earnings growth are starting to put PetroChina's
balance sheet under pressure.
"Significant policy reforms are needed (yet out of company's
control) to turn PetroChina's refining and gas pipeline
operations around and reaccelerate its earnings," they said in
the note, maintaining their underweight rating on the stock,
believing its premium valuation over its peers is unjustified.
Down 6.7 percent in 2013, PetroChina is trading at a 4.5
percent premium to its historical median forward 12-month
earnings, according to StarMine. CNOOC is trading at a
22 percent discount, while China Petroleum and Chemical Corp
(Sinopec) is trading on par with its median.
CNOOC slipped 0.8 percent on Friday and has dived 14.7
percent in 2013. After markets closed, it posted a 9.3 percent
fall in 2012 net profit to 63.7 billion yuan, compared to a
Thomson Reuters I/B/E/S consensus forecast for 64.9 billion yuan
from 31 analysts.
Sinopec, due to post its earnings by Sunday,
gained 0.2 percent in Hong Kong and 2.7 percent in Shanghai.
This year, it is down 0.3 percent in Hong Kong but up 11.6
percent in Shanghai.
China Construction Bank slipped 0.6
percent in Hong Kong and 0.1 percent in Shanghai ahead of its
earnings due on Sunday, the first among the "Big Four" Chinese
banks to report.
China Unicom jumped 3.7 percent in its best day
since August after the country's second-largest mobile carrier
posted a slightly better-than-expected 68 percent rise in 2012
net profit from a year earlier.
Since Jan. 30, the Hang Seng Index has declined 7.2 percent
while the China Enterprises Index has shed more than 10 percent.
Citi strategists said in a note on Friday that offshore
China funds saw a fourth-straight week of net outflows in the
week ended March 20, citing data from global flows tracker EPFR.