HONG KONG, Aug 16: Hong Kong shares on Thursday eked out gains in weak trading, lifted by a 5 percent jump for Chinese internet giant Tencent Holdings after it reported strong quarterly profit.
Corporate profitability remained the focus after the Chinese Ministry of Finance said the profit drop at the country’s non-financial state-owned enterprises in the first seven months accelerated from the January-June period.
Markets barely moved on fresh China data that showed declining inward investment.
Late on Wednesday, Premier Wen Jiabao said China’s economy faces big headwinds, but slowing inflation is giving the government more leeway for adjusting monetary policy.
Mainland Chinese markets were weaker, with alcohol producers among the top drags on benchmark indices after leading industry player Tsingtao Brewery posted first half earnings that trailed expectations.
The CSI300 Index of the top Shanghai and Shenzhen listings slipped 0.3 percent at midday to its lowest since Jan. 9. The Shanghai Composite Index slipped 0.1 percent to edge back towards 2012 lows.
The Hang Seng Index was up 0.3 percent at midday, staying within the tight 240-point range it has moved for almost two weeks in weak turnover that extended into Thursday.
‘Part of the low market interest is down to the August summer effect,’ said Larry Jiang, chief investment strategist at Guotai Junan International Securities.
‘It’s a given that earnings for Chinese companies are going to be bad, but the prospects for recovery are not so clear, so you risk being wrong going long and caught if you go short any more from here,’ Jiang added.
Investors have rewarded companies with better earnings visibility despite their outperformance in the year to date.
Tencent Holdings soared 5.7 percent to a more than three-month high after it said late on Wednesday that second-quarter net profit rose 32 percent from a year earlier to 3.1 billion yuan ($492 million). The percentage increase, largely in line with estimates, was the biggest rise since the first quarter of 2011.
In 2012, Tencent is up 55.7 percent. Last year, it shed 7.6 percent. The stock is currently trading at 23 times forward 12 month earnings, a 15 percent discount to its historical median, according to Thomson Reuters StarMine.
Another defensive favourite this year, China Mobile , slipped 1 percent ahead of its first half corporate earnings at midday. For the half, China’s largest mobile provider reported net profit of 62.2 billion yuan, slightly lower than forecast.
ALCOHOL PRODUCERS PROD CHINA LOWER
In China, investors were not cheered by measures introduced by the Shanghai stock exchange to encourage companies listed on China’s main bourse to increase dividend payouts. Shanghai midday volume was the lowest in 2012.
Tsingtao Brewery dived 3.5 percent in Shanghai and 5.3 percent in Hong Kong after posting a 1.8 percent rise in first-half net profit, slower than its 14.5 percent rise in first quarter net profit.
The result weighed on its peers. Yanghe Brewery shed 1.9 percent. Chinese baijiu or white spirit producers Kweichow Moutai and Wuliangye lost 1.5 and 1.1 percent, respectively.
Moutai has declined 7.8 percent since it posted interim earnings late on Aug. 9 that were below market expectations and the company’s own guidance.
It is still up 24.4 percent in 2012, compared with the Shanghai Composite’s 3.7 percent fall and the CSI300’s 0.1 percent decline.
(agencies)
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