Consolidation looms after stretch of buying

PUBLISHED : Thursday, 21 July, 2005, 12:00am
UPDATED : Thursday, 21 July, 2005, 12:00am

The Hang Seng Index finished higher yesterday after Tuesday's sluggish performance, but brokers saw signs of profit-taking at a high level which indicated consolidation would follow.

The blue-chip index rose 34.96 points, or 0.24 per cent, to end the day at 14,602.7, after gaining as much as 106.09 points in the morning session. Turnover increased slightly to $23.94 billion from $21.56 billion on Tuesday.

'The benchmark index lacked support after climbing a hundred points as investors started profit-taking,' said Kenny Tang Sing-hing, an associate director at Tung Tai Securities.

Global banking giant HSBC was the driver of the index's upside, adding 0.4 per cent to $125.50, which accounted for 17.9 points of yesterday's gain. Mr Tang believed rival Citigroup's lower than expected second-quarter results were likely to limit HSBC's gain.

Another index heavyweight China Mobile fell 0.82 per cent to $30.15, after gaining 7.29 per cent over the past week. China's largest mobile operator yesterday said that it had signed up 3.28 million users last month, compared with 3.4 million in May.

Smaller rival China Unicom closed flat at $6.60 after sliding 2.27 per cent. The company on Tuesday reported that it added only 1.3 million new customers last month, which was the lowest in three years.

CNOOC, China's third-largest oil company, rose 3.76 per cent early on but that was eroded after Chevron, its rival in the bidding war to take over Unocal, raised its offer to US$17.1 billion in cash and stock. CNOOC closed at $4.675, a gain of only 0.53 per cent.

After the blue-chip stocks had enjoyed several days of buying, investors turned their attention to the laggards yesterday, which usually indicates consolidation in the near future, said KGI Asia Securities director Kwong Man-bun.

Yue Yuen Industrial, the world largest shoemaker, was the biggest blue-chip gainer yesterday, rising 4.48 per cent to $24.45, while China Resources Enterprise was the worst performer, dropping 1.66 per cent to $11.85.

The market focus was on the H-share index yesterday after China's National Bureau of Statistics announced that the mainland's second-quarter gross domestic product rose 9.5 per cent year on year, beating market forecasts.

Mainland stock markets reacted positively to the news with the Shanghai Composite Index rising 0.65 per cent to 1,021.05 points and the Shenzhen Composite Index adding 0.94 per cent to 240.63 points.

Hong Kong's H-share index finished 90.19 points higher at 4,982.25, a rise of 1.84 per cent. The index did rise above the key 5,000-point at one stage, reaching 5,040.18 in the morning session, but ran out of steam after that.

Mr Kwong said the market did not have enough support for the H-share index to stay above 5,000, unless the H-share companies reported better than expected interim results.

PetroChina led the gains, climbing 2.52 per cent to $6.10, accounting for 32.7 per cent of the H-share index's upside.

The oil company reported positive first-half operating statistics from the upstream segment and a higher than expected average realised crude oil price.

ICEA Securities said in a report that it had revised up the full-year net profit forecast for PetroChina by 7 per cent to 138 billion yuan and raised its target price to $6.60. The brokerage house also expects a 41 per cent year-on-year increase in PetroChina's interim net profit to 63.8 billion yuan.

Commodity stocks outperformed other sectors as the market expects China's robust GDP growth will lead to a stronger demand for raw materials.

Aluminum Corp of China, the country's largest aluminium producer, rose 5.2 per cent to $4.55. China's largest metal producer Jiangxi Copper added 4.05 per cent to $3.85. Yanzhou Coal Mining gained 4 per cent to $6.50.

Insurance stocks were the other star performers. Ping An Insurance, China's second-biggest life insurer, added 1.98 per cent to $12.85. The company yesterday said that it earned 36.4 billion yuan in premiums in the first half.

China Life Insurance gained 1.8 per cent to $5.65 while PICC Property and Casualty rebounded 3.84 per cent to $1.89, after two straight days of losses.