HONG KONG, May 9: Hong Kong shares look set for a fifth straight day of losses on Wednesday, dragged by financials and growth-sensitive sectors as investors cut risk and rotate into defensive plays, pointing to caution over the Greek bailout deal possibly unravelling.
Adding to market jitters, China’s ruling Communist Party is ‘seriously considering’ delaying its upcoming five-yearly congress by a few months as the party struggles to finalise a once-in-a-decade leadership change.
The CSI300 Index dropped 1.5 percent by midday, while the Shanghai Composite Index lost 1.3 percent. The China Enterprises Index of the top Chinese listings in Hong Kong fell 1.9 percent, while the broader Hang Seng Index slipped 0.9 percent.
‘There is a distinct defensive tone today. It’s perfectly understandable since long funds have to protect their positions with so much going on, particularly for China, where political uncertainty supercedes most,’ said Wang Ao-chao, UOB Kay Hian’s Shanghai-based head of China equity research.
Chinese oil majors were among the top drags on benchmark indices, hit by slumping oil prices. CNOOC Ltd slumped 2.9 percent in Hong Kong, extending its bleed this week to more than 7 percent.
PetroChina lost 1.5 percent in Shanghai and 1.8 percent in Hong Kong, while China Petroleum and Chemical Corp (Sinopec) lost 1.4 percent in Shanghai and 1.5 percent in Hong Kong.
Chinese banks, seen as barometers of the world’s second-largest economy, were also broadly weaker. In Hong Kong, China Construction Bank (CCB) lost 1.7 percent, while Bank of China slipped 1.6 percent.
CCB’s president told Reuters late on Tuesday that the world’s second-biggest bank by market value will see slower profit growth this year, mirroring the broader economic trend, although its 2012 net profit could still grow by a double digit percentage.
‘We prefer insurers to banks as we believe China banks’ performance is capped by uncertainties surrounding the sector, despite the undemanding valuation,’ Nomura analysts said in a note on Wednesday.
Lucy Feng, Nomura’s China banking analyst, warned of slowing fee-income growth for the sector due to tighter regulatory scrutiny, early signs of asset quality deterioration and rising credit costs that are limiting earnings growth.
China Mobile displayed rare strength on the day, rsing 1.5 percent in Hong Kong, as investors opted for the popular defensive play. The Hang Seng Utilities Index, of which China Mobile is a component, was a relative outperformer among sectors.
Swire Properties jumped 3.8 percent in midday volume that has exceeded its 30-day average, bucking broader market weakness after Goldman Sachs upgraded the stock to ‘buy’ and added the stock to its conviction list.
In a report on Wednesday, Goldman analysts identified Swire as a key beneficiary of the secular growth trend for luxury residential and commercial properties outside central districts in Hong Kong. (agencies)
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