HK, Shanghai shares fall on weak U.S. market

Published: 26 Oct 2009 21:42:38 PST

* China, HK shares track weak overseas markets

* HK developers fall after HKMA limits mortgages

* China Life gains on rosy earnings outlook (Updates to midday)

HONG KONG/SHANGHAI, Oct 27 - Hong Kong shares retreated on Tuesday from a 14-month high, as investors pocketed recent gains on Wall Street, while local developers slumped after the government moved to curb rising property prices.

In Shanghai, China's key stock index sank 1.77 percent, led by energy and metals shares on soft commodity prices and pressured by weak markets overseas, which spurred the market to consolidate recent strong gains.

The benchmark Hang Seng Index fell 1.46 percent or 330.21 points to 22,259.52. Turnover was at HK$42.84 billion ($5.5 billion), versus midday Friday's HK$40.62 billion.

Among property developers, Sino Land fell 4.76 percent, Henderson Land dropped 3.89 percent, Sung Hung Kai Properties declined 3.11 percent and Hang Lung Properties retreated 3.05 percent.

The Hong Kong Monetary Authority on Friday said it would implement measures to slow a surge in luxury property prices driven by rich buyers from mainland China, including capping mortgage loan values.

"In the last few weeks, things got out of hand and property prices skyrocketed," said Jackson Wong, investment manager at Tanrich Securities. "The government is just trying to cool things down a little bit. It's not going to affect property prices."

Hong Kong was not expected to adopt more measures to restrict demand for property, Wong said, adding that it may instead boost supply by buying more land.

The China Enterprise Index of top locally listed mainland Chinese companies fell 0.46 percent to 13,254.53,led by a 4.8 percent drop in China Oilfield.

China Life reversed earlier losses and gained nearly 2 percent on optimism that rising financial markets would sustain its long-term growth. The world's top life insurer by market value on Monday reported that third-quarter earnings more than doubled.

Rival Ping An Insurance was up 2.01 percent, after opening down 2.43 percent, ahead of the announcement of its third-quarter results later in the day.

China National Building Material Co Ltd was up 1.04 percent, after its 52.4 percent owned unit Beijing New Building Material posted a 246.8 percent rise in third-quarter net profit.

ANTA Sports fell 4.85 percent. The company said its major shareholders would sell a total 80 million shares, or 3.2 percent of the company, at HK$10 each as part of their asset management plan.

China CITIC Bank gained 1.17 percent. The bank on Monday posted a 7.52 percent rise in third-quarter earnings to 4.35 billion yuan as it developed a fee-based income business and increased the proportion of non-interest income.

SHANGHAI DOWN

The Shanghai Composite Index ended the morning at 3,054.538 points, after scoring an 11 percent gain so far this month as of Monday's close.

Losing Shanghai A shares outnumbered gainers by 764 to 174, while turnover dropped to 70 billion yuan ($10 billion) from Monday morning's 76 billion yuan.

Energy and metals shares were hit hard by weakness in commodity prices, with China Shenhua Energy down 3.15 percent at 35.32 yuan and Jiangxi Copper down 3.16 percent at 40.48 yuan.

Financial shares were soft, with Industrial and Commercial Bank of China, the country's biggest lender, slipping 1.34 percent to 5.15 yuan.

A total of 236 billion ICBC shares worth 1.23 trillion yuan became tradeable on Tuesday after the expiry of lock-up periods but analysts said they were mainly in the hands of big institutions that were unlikely to cut their holdings sharply.

"Soft overseas stock and commodity markets encouraged selling, but earnings could help the index to stay firm," said Chen Shaodan, senior analyst at Stockfly Securities in Beijing.

The official China Securities Journal reported that, with about half of China's 1,600-plus listed companies having posted third-quarter results so far, combined net profit was running slightly above the same period last year.

Analysts also noted a significant improvement in earnings from the second quarter and several believed the index would find support after a test of the downside around the 10-day moving average, now at 3,044 points. They believed the market was due for a breather after its recent run-up, fuelled by optimism over the earnings outlook, which pushed the relative strength index to 63 as of Monday's close, indicating the index was starting to get overbought.

Chinese stock market investors have gradually been regaining confidence over the course of this year and the results of listed companies have been improving, China's top securities regulator said in comments published late on Monday.

China Life slipped 0.92 percent to 31.25 yuan. It had risen 3.85 percent on Monday ahead of the earnings announcement in anticipation of a strong report.

Renewed speculation of an imminent announcement on the approval of a long-discussed Walt Disney proposal to build a theme park in Shanghai lifted shares of companies rumoured as likely participants in the project, with Shanghai Lujiazui Finance & Trade Zone Development up 3.24 percent at 29.28 yuan and Shanghai Jielong Group Industry climbing 4.34 percent to 15.85 yuan.

A Disney representative could not immediately be reached for comment in Hong Kong