* HSI +0.1 pct, H-shares -0.6 pct
* China coal sector dives after quarterly earnings
* Esprit soars after UBS upgrade raises turnaround hopes
* China shut for 3-day Labor Day holiday
By Clement Tan and Yimou Lee
HONG KONG, April 29 Hong Kong's Hang Seng Index
edged higher on Monday as strength in retailer Esprit Holdings
offset weakness in Chinese commodities counters after
disappointing corporate earnings doused recovery hopes.
But there were emerging signs of a differentiation within
these cyclical sectors, particularly with the leading players in
the coal, steel and cement sectors that are seen controlling
costs more effectively.
The Hang Seng Index ended a choppy morning session up
0.1 percent at 22,568.2 points. The China Enterprises Index
of the leading Chinese listings in Hong Kong shed 0.6
Mainland China is shut for a three-day Labour Day holiday
and will resume trading on Thursday. Hong Kong markets will also
be closed on Wednesday for the same holiday.
Esprit Holdings jumped 4 percent to its highest in
almost three months, thanks to an upgrade from "neutral" to
"buy" by UBS analysts, who believe its turnaround prospects have
improved following more focused execution.
Shares of the Europe-focused retailer are down almost 3
percent on the year after ending up 16 percent in 2012. This
compares to the 0.4 percent decline on the Hang Seng Index in
2013 and a 23 percent rise in 2012.
Coal mining plays fell, however, after China Shenhua Energy
posted a 1.2 percent decline in quarterly net profit,
following a 38 percent decline recorded by China Coal Energy
China Shenhua was down 0.7 percent, while China Coal tumbled
5.9 percent and looked headed for its worst daily showing in 11
months, hit further by a series of broker price target
"Some of the coal companies managed to disappoint reduced
earnings expectations and coal prices are still weak, so we're
likely to see more share price weakness from here," said Jackson
Wong, Tanrich Securities' vice-president for equity sales.
Goldman Sachs said Shenhua's diversified asset class will
continue to help mitigate the impact from coal price weakness.
Goldman believes coal prices will stay weak through 2015 and
combine with inflation to squeeze the margins of Chinese coal
JP Morgan analysts cut their target on China Coal from HK$9
to HK$8, citing its rising gearing ratios as a near-term concern
after quarterly results showed the company was unable to
maintain stringent cost controls as it did the previous two
The Chinese steel sector did not fare much better.
Despite posting results that hinted at signs of a
turnaround, Angang Steel shed 2.4 percent after the
China's steel industry body warned its members on Saturday to
rein in expectations for the remainder of the year.
An anticipated increase in demand would not be enough to
justify big rises in production in coming months, China Iron and
Steel Association (CISA) officials said, adding that the
government was looking for new ways to restructure the sector,
which was still facing massive problems.
Official data on Saturday showed industrial profits rising
5.3 percent in March from a year ago, compared with the 17.2
percent increase for the first two months. On the quarter,
industrial profits rose 12.1 percent.
STRENGTH IN PATCHES
As the China coal sector slumped, investors continued to
rotate into Chinese power producers on hopes that lower coal
prices will expand margins. Huaneng Power jumped 3.2
percent to its highest since November 2007.
Stocks of Chinese property developers also rose as
disappointing quarterly earnings for cyclical counters raised
hopes that Beijing will not clamp down harshly on increases in
China Resources Land and China Overseas Land
each climbed 0.9 percent, extending a recent recovery
ahead of the release of China's official purchasing managers
index data for April on May 1.