Hong Kong shares test month-low as power producers dip, China weaker too

PUBLISHED : Thursday, 10 October, 2013, 2:40pm
UPDATED : Thursday, 10 October, 2013, 2:55pm

Hong Kong shares tested their lowest in a month in early Thursday trade, with mainland China markets also weaker, as power producers fell following cuts to on-grid prices of thermal electricity that could hurt their margins.

The market’s focus will be on a batch of China data that could start to appear this week: September figures for money supply and loan growth are due by October 15, trade data on October 12, inflation on October 14, with third quarter GDP due October 18.

By midday, the CSI300 of the leading Shanghai and Shenzhen A-share listings was down 1 per cent, while the Shanghai Composite Index shed 0.9 per cent. Both had closed on Wednesday at their highest since September 23.

The grid price cuts were within expectations, but IPP margins shouldn’t be too adversely affected because coal prices have fallen by more this year
Linus Yip, First Shanghai Securities

The China Enterprises Index of the top Chinese listings in Hong Kong sank 1.1 per cent. The Hang Seng Index was down 0.8 per cent at 22,844.5 points, briefly dipping below 22,800 after a bunch of callable bull contracts were taken out at that level.

Selling pressure had accumulated over the last few sessions as the Hang Seng Index held above 22,845, a September 30 low for more than a week, market watchers said. Weak bourse turnover also magnified the move down.

China Resources Power slid 2.3 per cent after closing on Wednesday at its highest since mid-July. China’s state planning agency has cut the on-grid price of thermal electricity by 0.01 to 0.025 yuan per KWh across regions.

“The grid price cuts were within expectations, but IPP margins shouldn’t be too adversely affected because coal prices have fallen by more this year,” said Linus Yip, a strategist at First Shanghai Securities.

Chinese coal prices fell around 16 percent in the first three quarters of the year due to sluggish demand, putting miners under strain but reducing costs for power producers.

Chinese brokerages were also weaker on fears of heightened competition after the online payment affiliate of dominant Chinese e-commerce company Alibaba Group is taking control of Tianhong Asset Management Co to accelerate its push into online financial services.

Shares of Tianhong shareholder Inner Mongolia Junzheng Energy & Chemical Industry surged the maximum 10 per cent limit in Shanghai, while China’s largest listed brokerage Citic Securities fell 2.2 per cent in Hong Kong and 3.4 per cent in Shanghai.

But there were gains for Chinese solar panel maker Shunfeng Photovoltaic International in Hong Kong.

Its shares surged 12.6 per cent to a record high after China’s Wuxi government said the company had been chosen as the preferred bidder for a stake in the main unit of troubled rival Suntech Power Holdings.

Gains for Tianjin and Qingdao-related A-share counters in anticipation of official approval for free-trade zones in the two Chinese coastal cities were sporadic on Thursday, after strong gains earlier this week.

Tianjin Port added another 4 per cent and is now up nearly 26 per cent this week, while Qingdao Haier spiked 9.2 per cent after more local media reports on the possibility of free trade zones in other major Chinese cities following the September launch of one in Shanghai.

But Tianjin Development sank 5.4 per cent, while Tianjin Global slid 4.1 per cent.