HONG KONG, May 4: Hong Kong shares slipped on Friday, with Chinese property developers weak after the biggest player by sales posted its first monthly sales decline in three, renewing fears about a sector central to the state of the world’s second-largest economy.
The sector was also weak in mainland Chinese markets, limiting strength on benchmark indices. The CSI300 Index and the Shanghai Composite Index each ended up 0.1 percent at midday in the lowest trading volumes this week.
Strength in resources-related sectors guided mainland benchmark indices to midday gains. The Shanghai materials sub-index was up 0.7 percent, with Baotou Rare Earth jumping 7.4 percent.
The China Enterprises Index of the top Chinese listings in Hong Kong slipped 1 percent, while the broader Hang Seng Index lost 0.7 percent, poised to end its best week in almost three months with a second-straight daily loss.
Shenzhen-listed China Vanke was down 0.6 percent in midday volume that has exceeded its 30-day average after reporting late on Thursday that its April sales fell 6 percent to 7.4 billion yuan ($1.2 billion) from the same period a year ago, snapping a two-month rise.
‘The Chinese property sector is still quite messy at the moment, so it’s not possible to say anything too definite. We still expect smaller players to face some liquidity issues,’ said Alan Lam, Julius Baer’s Greater China equity analyst.
Poly Real Estate lost 1.1 percent in Shanghai, with the Shanghai property sub-index down 0.4 percent, the biggest underperformer among sectors at midday.
In Hong Kong, China Resources Land and China Overseas Land & Investment Ltd were among the top percentage losers among Hang Seng Index components, down 3.6 and 2.3 percent respectively.
In 2012, the Chinese property sector has broadly outperformed after taking the brunt of the slump last year, suggesting investors are expecting Beijing to loosen policies on the sector as growth slows in the world’s second-largest economy.
Poly Real Estate is up 28 percent compared to the nearly 15 percent gain on the CSI300 Index. China Overseas Land has surged 31 percent, compared to the 14.4 percent gain on the Hang Seng Index.
‘We remain concerned that the market in general seems to be too optimistic on the continued sales rebound and gradual loosening of the housing policy,’ said Credit Suisse China property analysts in a note to clients dated May 3.
They added there may be risks of a pull back in share prices for the sector after steep gains this year, while maintaining their sector-wide underweight rating.
CORPORATE GOVERNANCE COMES TO THE FORE
Hong Kong-listed shares of Huabao International Holdings Ltd slumped 11.3 percent on the resumption of trade after being suspended since April 25 after a short-seller report alleging the company had reported excessively high margins.
China’s biggest flavouring and fragrance company denied allegations of false accounting on Friday, but failed to reassure investors who sold the stock to a three-year low.
Sun Hung Kai Properties Ltd said on Friday that former chairman Walter Kwok had informed the company he was arrested on May 3 in conjunction with a corruption investigation and had been released on bail.
Trading in Sun Hung Kai Properties Ltd and its unit SunEvision Holdings Ltd, two companies run by Hong Kong billionaire brothers Thomas and Raymond Kwok, was suspended on Friday morning.
(AGENCIES)
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