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SCMP Reporter

HSI heavyweight disguises overall firm sentiment with second-tier property plays returning to favour

The blue-chip index fell slightly yesterday, pressured by selling of HSBC, but overall sentiment remained firm and money rotated into other parts of the market such as second-tier property plays, H shares and Macau-concept stocks.

The H-share index gained 21.2 points or 0.44 per cent to close at 4,871.19 as a new record low for the US dollar against the euro pushed up commodity prices and sparked demand for base metal and raw material stocks.

'Chinese stocks are still gaining momentum after many of the companies reported excellent third-quarter earnings growth, a lot of them above expectations,' said  Alex Tang Yee-yuk, a director of research at Core Pacific-Yamaichi.

The H-share sector as a whole was also supported by the current anticipation of a yuan revaluation, Mr Tang added.

News out earlier in the week that China would make it easier for mainlanders to take money abroad also continued to underpin China-related counters on the assumption that parts of that money might end up being invested into mainland stocks listed in Hong Kong, said Francis Yu, the chief analyst at Hani Securities.

The Hang Seng Index dipped 0.18 per cent to end 25.16 points lower at 13,799.82.

A look behind those numbers showed that HSBC alone fell 35 index points, indicating that the rest of the market was holding up fairly well. Of the 33 index members, 11 ended lower while nine were unchanged and 13 finished higher.

HSBC shed  0.74 per cent to finish at $133 after telling analysts in a telephone conference that revenue trends at its US consumer finance unit Household International were only 'modestly growing or flat'.

The comments came on the heels of Household reporting a 32 per cent drop in its bottom line in the third quarter and Merrill Lynch analyst Keith Irvine said they might force Merrill to make a 'modest downward rebasing' of its full-year numbers for the US unit. He kept his target price for HSBC unchanged at  $140, however.

'People were using Household as an excuse to take profit after the strong gains but if the US dollar continues to weaken, I think HSBC can regain momentum in the next few sessions,' said  Kenny Tang Sing-hing, a research manager with Tung Tai Securities,  adding that the bank would make sizeable gains as it converted its earnings in euro and sterling back into its US dollar reporting currency.

Fashion retailer Esprit is another counter benefiting from the strong euro, given that it derives more than 80 per cent of its revenues from Europe. Yesterday it rose 0.94 per cent to $42.90 and so far this year the stock has rallied 71 per cent, making it by far the best blue-chip performer. CNOOC, which is the runner-up at this stage, has gained 37 per cent this year.

Hopes that the weaker US dollar will attract more funds to Hong Kong, as it makes valuations of equities and fixed assets look cheaper, also boosted some property counters. Since the Hong Kong dollar is pegged to the  greenback, the local currency will weaken against other currencies along with the greenback.

Cheung Kong rose 0.72 per cent to $69.25 and Hang Lung Properties added 0.8 per cent to $12.50. Second-tier developers were especially sought after, with Hysan Development rising 1.42 per cent to $14.25 and Kerry Properties rallying 5.59 per cent to $16.05.

A lot of the buying also continued to be focused on Macau-related stocks, with notable gainers including eSun, which rose 14.28 per cent to 52 cents after revealing plans to build 30 residential detached houses in Macau.

Heritage International, which according to one broker provides financing for casinos, jumped 86.6 per cent to 2.8 cents. The broker said the penny stock was probably bid up by investors looking for laggards that could benefit from an expected casino boom in the former Portuguese colony.

Among the H shares, gold miner Zijin Mining added 4.34 per cent to $3.60 as the spot gold price extended its 16-year high to above US$445 an ounce. Jiangxi Copper rose 3.84 per cent to $4.725, Anhui Conch Cement gained 2.06 per cent to $9.90 and Aluminum Corp of China was up 1.58 per cent at $4.80.

Jilin Chemical rallied 7.21 per cent to $2.60.

ZZNode rose 12.72 per cent to 62 cents on its debut on the  main board, after trading as high as 34.54 per cent above its 55-cent offer price shortly after opening. The telecommunications network solutions provider raised  $55 million before the listing.

China Netcom,  which gained 10.11 per cent on its first trading day on Wednesday, spent most of the session in negative territory after its American depositary shares fell 4.06 per cent in New York. Supportive buying by the sponsors helped lift the stock from an intraday low of $9.10 and left it unchanged for the day at $9.25.



HSBC fall shunts index in downward direction