China shares sink for third-straight month, Hong Kong weak too

HONG KONG: Hong Kong shares slipped and China sank to levels not
seen since early 2009 on Friday, with both markets ending August in the
red after first half corporate earnings disappointed and there seemed
little chance of an imminent recovery.
Turnover was lackluster
ahead of an annual meeting of central bankers in Wyoming later on
Friday, with the market expecting Federal Reserve Chairman Ben Bernanke to keep expectations of monetary easing intact into September, but not immediately take any measures.
A scheduled quarterly rebalancing of the MSCI China index at Friday's close did little to help boost Friday's volumes.
In
August, investors parked money in shares of companies able to project
resilient earnings growth in a sluggish economic environment.
"People
have been generally defensive in August, with earnings visibility
overriding other considerations, such as low valuations," said Alan
Lam, Julius Baer's Greater China equity analyst.
The CSI300
Index of the top Shanghai and Shenzhen listings shed 0.3 percent on
Friday and 5.5 percent this month, suffering a third-straight monthly
loss. The Shanghai Composite Index shed 2.7 percent in August.
The
Hang Seng Index lost 0.4 percent to 19,482.6, holding above the 38.2
percent Fibonacci retracement of its rise from June lows to August
highs at about 19,443. The benchmark shed 1.6 percent in August, its
first monthly loss in three.
"September will be very busy
policy-wise, so there might be a switch into cyclical names. There are
meetings in Europe and the U.S., but I don't expect China to do too
much ahead of its National Congress meeting likely in October," Lam
added.
Lam was referring to a meeting, to take place before
year-end, that will mark the start of a once-in-a decade political
leadership transition. New leaders do not typically make big changes in
their first year, but could be forced into action if data suggests
China could miss economic growth targets for the year, he said.
Beijing
is expected to post China's official manufacturing managers' index
reading on Saturday. A Reuters poll sees the index easing to a 9-month
low of 50 in August.
The state-run China Securities Journal
reported on Friday that the combined first-half net profit of China's
2,453 listed companies dipped 0.38 percent from a year earlier to 1.01
trillion yuan ($159.07 billion).
On Friday, Citic Pacific
slumped 7.1 percent to its lowest since April 2009 after iron ore
looked set to hit nearly three-year lows.
In August, the stock
had its worst performance in 10 months as Chinese steel producers
shunned fresh cargoes in the face of waning demand.
Sany Heavy
Industries dived 4 percent after missing forecasts with a 28 percent
fall in second-quarter net profit, its biggest quarterly profit drop
since 2008, as the country's economic slowdown led to a jump in unpaid
bills.
ESPRIT, LI & FUNG AT AUGUST EXTREMES
Within
the Hang Seng Index, August's top performing stocks are skewed towards
those that rely on the relative safety offered by the Chinese consumer
as investors pulled money out of cyclical sectors most linked to a
slowing economy at home and abroad.
Top performing stock Esprit Holdings
rose almost 30 percent in the month as it rebounded from a year-low of
HK$8.83 on July 25. Macau casino company and the latest entrant into
the Hong Kong benchmark Sands China was the second-best performer, up
nearly 20 percent.
At the other end of the spectrum, shares of
Li & Fung , exporter for top U.S. retailers such as Wal-Mart , fell
18 percent, the worst monthly performance since the October 2008 peak
of the financial crisis.
Suffering from limp demand from its
core markets in the U.S., Europe and China, the company reported on
Aug. 9 a sharp drop in profits as well as shrinking margins sending
investors scurrying for the exits and wiping out about a fifth of the
company's value in a day. - Reuters