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David Robinson

China plays surge as buyers rotate out of real estate shares and industrial issues

Hong Kong stocks ended slightly lower for the second consecutive day  yesterday, with investors erring on the side of caution following heavy losses in the Japanese  market and Monday's hefty share placement by Henderson Land.

However, counterbalancing blue-chip losses  China stocks resurged as  H shares and red chips recorded strong gains.

The Hang Seng Index fell 3.12 points, or 0.02 per cent, to settle at 11,720.8, with turnover robust  as Hong Kong continued to draw in international institutions.

Analysts said domestic Asian stocks would continue to benefit from the weak US dollar.  They said heavy losses in  Japan - where the Nikkei-225 Index slumped 2.57 per cent - had given the market  jitters.

'At this level, investors have become quite cautious and the pull-back in Japan has affected market sentiment as well. We will probably enter a short period of consolidation,' said Alex Wong,  a director of Rexcapital Asset Management.

Henderson Land's $2.98 billion share placement on Monday had already put investors on the back foot with concerns other blue chips may follow.

Property stocks were again the biggest losers,  led by the territory's two biggest developers. Cheung Kong  slumped 2.69 per cent to $63.25, while Sun Hung Kai Properties fell 2.32 per cent to $63. Sino Land - which lost its place on the Hang Seng Index in June - plummeted 7.93 per cent to $3.77.  Property and development giant  Wharf slid 4.27 per cent to finish the session at $20.15.

'Investors have rotated out of property and industrial stocks into China plays,' Celestial Asia Securities research head Herbert Lau Chung-kwan said.

H shares surged 2.9 per cent, while red chips leapt 2.4 per cent.

The mainland's biggest wireless phone operator China Mobile leapt 3.5 per cent to $22.15, while fixed-line giant China Telecommunications jumped 3.57 per cent to $2.175  as attention turned to the telecommunications sector, which has lagged the recent rally.

The market has also been speculating that an increase  in the yuan against the US dollar will enhance telecommunications companies' valuations.

Mainland beermaker Tsingtao Brewery soared 12.58 per cent to $8.50, while metal maker Aluminum Corp of China rose 3.39 per cent to $3.05.

ING Financial Markets head of Hong Kong and China research Kingston Lee said growing speculation the mainland  would postpone its qualified domestic institutional investor scheme, which would open the Hong Kong market to Chinese  institutions, had little effect on mainland  stocks as investors had been anticipating this strategy shift for some time.

Key Figures

Close: 11,720.8 (-3.12)

Turnover: $19 bln

Volume: 15.95 bln shares

Day's high: 11,885.24

Day's low: 11,648.61

Advanced: 421

Declined: 428

Unchanged: 441

October futures: 11,740 (+25)

November futures: 11,685 (+25)



Blue chips slip as hefty losses in Japan temper investor caution