Hong Kong shares rose on Thursday as Chinese banks and infrastructure plays gained on expectations of more government support for the economy, offsetting weakness in local property developers. The Hang Seng rose 0.4 percent, with the index of top Hong Kong-listed mainland firms up 1.9 percent to be the day's best performing benchmark in Asia.
Industrial & Commercial Bank of China jumped 4.3 percent to a near five-month high, while Bank of Communications up 3.5 percent. China's 'Big 4' banking shares were the Hang Seng's top performers. Shares of contract equipment maker Foxconn International surged 16.9 percent in a late move that was attributed to a Daiwa Capital research report, which said the company might receive new orders from Apple Inc next year.
On the mainland, the CSI300 of top Shanghai and Shenzhen listings fell 0.9 percent while the Shanghai Composite was down 0.8 percent, partly on profit-taking and on weakness in auto shares following weak September vehicle sales. "There's definitely some rotation happening, with money flowing into Chinese banking shares as valuations are quite low," said William Fong, a China portfolio manager at Baring Asset Management in Hong Kong.
Investors were likely taking profits on Hong Kong property developers, said Fong, who remains optimistic on the sector for the medium term. Hong Kong developers are up 11 percent since the end of August, compared with a 7.8 percent rise for the Hang Seng. The top five losers on the Hang Seng were property shares, led by New World Development which fell 3.9 percent. Bellwether Sun Hung Kai was down 2.2 percent.
Losses in developers were easily offset by banks which rose after Central Huijin, a unit of China's sovereign wealth fund, said late on Wednesday that it had bought Shanghai-listed shares of the "Big 4" banks and would continue to increase its stakes. Speculation about government support, including buying by Huijin, buoyed mainland markets earlier in the week and underpinned the strength in Chinese banking shares, which have lost favour among foreign investors on worries about rising bad loans.
"We've seen similar promises by Huijin last year but this time it does show the government's intent on wanting to keep the market supported ahead of the leadership transition," said a Hong Kong-based trader at an Asian brokerage. Along with the Huijin news, China's Ministry of Railways (MOR) showed in its latest bond prospectus that it had upped its projection of 2012 rail spending slightly, which according to Jefferies is the fourth increase in this year's budget.
China Railways Construction Corp jumped 7.1 percent in Hong Kong while its Shanghai listing rose 2.6 percent. China Communications Constructions Co Ltd rose 5.6 percent. Hopes of more investment spending to counter a protracted economic slowdown in China also lifted construction-related sectors such as steel and cement. Angang Steel Co Ltd rose 2.3 percent while cement producer Anhui Conch rose 3.1 percent in Hong Kong and 1.1 percent in Shanghai.
Analysts at Jefferies remain cautious on the railways sector, saying that rail volumes remain sluggish and spending on new equipment remains unchanged, underscoring weak demand, despite the hike in the rail construction budget. "Our suspicion is that MOR wants to indicate to NDRC, which has been adding pressure, that it's doing all it can," said Jefferies analyst Julian Bu, in a note, refering to China's top economic planner, the National Development and Reform Commission.
China's annual economic growth probably slowed for a seventh straight quarter in the July-September period to the weakest level since the depths of the global financial crisis, a Reuters poll showed, reinforcing the case for further policy stimulus. Beijing will release September trade data on Saturday, inflation data on Monday and third-quarter GDP next Thursday.
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