November 3, 2009 / 9:07 AM / 9 years ago

China shares at more than 2-month high; HK falls

 * Shanghai market rises on economic optimism
 * Hong Kong stocks succumb to profit taking  (Updates to close)
 By Jun Ebias and Claire Zhang
 HONG KONG/SHANGHAI, Nov 3 (Reuters) - China's key stock index rose 1.22 percent in active trade on Tuesday, as signs of a rise in bank lending lifted optimism for sustained economic growth despite a major new share offer.
 In Hong Kong, local developers and banks succumbed to profit taking, dragging the benchmark index down for a second straight session.
 The Shanghai Composite Index .SSEC ended at 3,114.227 points, its highest close since Aug. 13.
 Gaining Shanghai A shares overwhelmed losers by 819 to 76, while turnover picked up to a six-week high of 170 billion yuan ($24.9 billion) from Monday's 154 billion yuan.
 The Nasdaq-style ChiNext <0#CHINEXT.SZ> market for start-up stocks, which began trade last Friday with a speculative surge, ended mostly weaker on profit-taking for a second day after two-thirds of its 28 stocks fell by their 10 percent daily limit on Monday.
 Optimism about the outlook for economic recovery and expectations of continued strong earnings growth in the fourth quarter boosted overall market sentiment, analyst said.
 They added that, as ChiNext trade became more rational, some funds would flow back to the main board, although they expected investors to be wary about the market becoming over-extended after a hefty rise of nearly 4 percent so far this week.
 "Investors are maintaining their optimistic stance toward economic data and listed firms' earnings, while expecting Chinese monetary policy to remain stable for the moment," said Chen Shaodan, senior analyst at Stockfly Securities in Beijing.
 The official China Securities Journal cited a research report from China Construction Bank forecasting that China's economic growth in the fourth quarter was likely to exceed 10 percent on the year, with full-year GDP growth seen at 8.3 percent.
 The newspaper also reported that China's top four state-owned commercial banks extended about 136 billion yuan in new loans in October, up 23 percent from a month earlier. [ID:nSHA151278]
 Another major official newspaper, the Shanghai Securities News, said new bank lending in China may have hit 300 billion to 400 billion yuan in October, broadly in line with market expectations. [ID:nPEK349957]
 "Investors are actively buying because of the outlook for economic recovery and ignored China Merchants Securities' IPO," said Chen Jinren, senior analyst at Huatai Securities. "The index has performed strongly in the last two days."
 China Merchants Securities said it would launch an IPO this week, which could be worth more than 10 billion yuan ($1.5 billion). It will start book building on Wednesday, adding to a series of brokerage IPOs. [ID:nSHA150277]
 Brokerage shares were firmer, with CITIC Securities (600030.SS) up 1.67 percent at 28.03 yuan.
 Metals shares were strong, with Shandong Gold (600547.SS) jumping 2.81 percent to 68.35 yuan as gold prices neared record highs.
 Two companies made strong debuts in Shenzhen, with Xinjiang West-Construction 002302.SZ up 105 percent from its IPO price at 30.81 yuan, while Shenzhen MYS Environmental Protection and Technology 002303.SZ climbed 39 percent to 35.28 yuan.
 The benchmark Hang Seng Index .HSI ended down 1.76 percent or 380.13 points at 21,240.06. Turnover was HK$61.01 billion ($7.9 billion), down from Monday's HK$65.12 billion.
 "The market is retreating and investors are taking profit," said Jackson Wong, investment manager at Tanrich Securities. "There is more downside at this point because we seem to have run out of major factors to prop up the market."
 Some investors were also waiting for the outcome of the U.S. Federal Reserve meeting and U.S. October jobs data later this week, before making more bets in the market, Wong said.
 "The market needs more data to validate expectations that the global economy is recovering quicker," he added.
 Bucking the trend, Swire Pacific (0019.HK) ended up 1.1 percent, but less than its 3.21 percent at midday. The aviation-to-property conglomerate said on Monday that it was considering a separate main-board listing for property unit Swire Properties Ltd. [ID:nHKG129751]
 Bank of America Merrill Lynch raised its rating on Swire Pacific to "buy" from "underperform" because of the possible unlocking of value through a spin-off of its property division.
 Fashion retailer Trinity Ltd (0891.HK) surged 49 percent on its trading debut in Hong Kong.
 DVN (Holdings) (0500.HK) was up 1.75 percent, less than its 10.53 percent gain at midday. Cisco Systems (CSCO.O) has agreed to buy the set-top box business of Hong Kong-based DVN for as much as $44.5 million. [ID:nN02467916]
 Index heavyweight HSBC Holdings (0005.HK) erased earlier gains to close down 0.75 percent. The lender was up 0.23 percent at midday on news of plans to boost its China presence by about 20 percent next year.
 China Construction Bank (0939.HK) slipped 2.36 percent and Bank of China (3988.HK) slid 2.65 percent.
 Hong Kong property developers extended losses on concern a government move to curb fast-rising property prices may squeeze earnings. Sino Land (0083.HK) fell 4.08 percent and Sun Hung Kai Property (0016.HK) was down 3.57 percent.
 The China Enterprise Index .HSCE of top locally listed mainland Chinese stocks was down 1.89 percent at 12,500.64.
 Agile Property (3383.HK) fell 3.2 percent. The Chinese property developer will issue four-year non-callable dollar-denominated bonds, a source said. [ID:nHKG153147]
 Other Chinese developers listed in Hong Kong also slid. Shimao Property Holdings (0813.HK) fell 3.81 percent and China Overseas Land (0688.HK) shed 3.41 percent.
 Fitch Ratings said China's red-hot property market was a concern for its sovereign credit rating because of the threat of worsening asset quality in the banking system. [ID:nHKG156094]
 Tencent Holdings (0700.HK) fell 3.63 percent to profit taking, retreating from a gain of as much as 5.4 percent on Monday.  (Editing by Chris Lewis and Jacqueline Wong)                                 

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