Mainland telecoms firms prop index as HSBC dips
Buying in property investors helps extend rally as punters cash in on developers
Hong Kong blue chips finished largely flat yesterday as strong buying of mainland telecommunications operators offset a slump in HSBC triggered by worse than expected second-quarter earnings from its bigger rival Citigroup.
Investors began taking profit on Sino Land, New World Development and Cheung Kong, which had driven the market higher in the past week, but property investors remained in favour and helped the Hang Seng Index finish up ever so slightly - extending its winning streak to five days.
At the close of trading, the index was 0.74 point higher at 14,567.74 after moving in a range between 14,493.27 and 14,625.08 points.
HSBC pulled the index 32.2 points lower by falling 0.71 per cent to $125 after Citigroup missed analysts' estimates for the first time in more than three years due to a decline in fixed-income trading and underwriting revenues.
'The main reasons that dragged down Citigroup's numbers will also affect HSBC,' said Kenny Tang Sing-hing, research manager at Tung Tai Securities.
The H-share index rose 5.68 points, or 0.12 per cent, to 4,892.06.
Turnover improved to $21.56 billion from $17.61 billion on Monday, indicating that the market remains well supported.
'The profit-taking pressure isn't that strong because investors are still positive about the property market, especially after Goldman [Sachs] said property prices would go up 30 per cent,' Mr Tang said. He was referring to a report published by the US investment bank on Monday that rated the local property sector as 'attractive'.
Investment-focused Hang Lung Properties was the top-performing property blue chip with a 1.65 per cent gain to $12.30, partly underpinned by a Citigroup recommendation upgrade to 'buy' from 'sell'. Henderson Land Development added 0.26 per cent to close at $39.20.
A lot of the buying momentum shifted to second-tier investors, with Great Eagle rising 2.56 per cent, Kerry Properties gaining 3.25 per cent, HKR International adding 2.7 per cent and small-scale luxury house developer Tai Cheung rallying 8.67 per cent.
New World Development dipped 2.9 per cent to $10.05, Sino Land shed 1.57 per cent to $9.40 and Cheung Kong declined 1.2 per cent to $82.30.
'There is consolidation in the property developers, but the laggards are catching up, which means the market has good support to move up to 15,000,' said Fulbright Securities general manager Francis Lun Sheung-nim.
Lenovo was the top-performing blue chip, rising 4 per cent to $2.60 after International Business Machines reported an unexpectedly higher second-quarter profit.
However, mobile operators had a bigger impact on the index. China Unicom rose 3.12 per cent to $6.60 and China Mobile climbed 2.36 per cent to $30.40. Together, they contributed 52 index points.
Some brokers attributed the outperformance to a ratings upgrade of Unicom by UBS, although the stock was only raised to 'neutral' from 'sell' and its new 12-month target price of $6.30 was below the current price. Others said talk of a probable delay in the issuance of third-generation licences in the mainland supported the sector.
'A delay would be good for the operators as it would reduce the amount of capital expenditure they have to come up with,' Mr Lun said.
Phillip Securities director Louis Wong Wai-kit said renewed speculation that China would widen the yuan trading band next month was also sparking buying in domestically focused sectors with little or no foreign debt, such as telecommunications and insurance firms.
PICC Property and Casualty rose 2.25 per cent to $1.82 and China Life Insurance added 3.74 per cent to close at $5.55. The latter announced a 91.1 billion yuan interim premium income.
Airlines soared above all other H shares as oil prices took a dive below US$58 per barrel and investors shrugged off last week's profit warnings, which had been widely expected due to high fuel costs.
China Eastern Airlines rose 4.84 per cent to $1.30, Air China gained 5 per cent to close at $2.625 and China Southern Airlines rallied 7.87 per cent to $2.40.
Guangzhou-based China Southern said on Monday it would set up a base in Beijing to capture an expected increase in travel demand ahead of the 2008 Olympics.