Hong Kong shares shed 2.1 percent on Monday, snapping a three-session winning streak, knocked down by lower energy prices and profit taking after the main index hit a nine-month high last week. Chinese stocks rose 1.67 percent, with bank shares strong as Ping An Insurance's plan to buy a stake in Shenzhen Development Bank boosted hopes for consolidation in the sector.
But the day's light turnover in both markets suggested investors were cautious. "The economic situation lacks clear signs that would be supportive for listed companies' earnings. The index is expected to consolidate," said Huatai Securities analyst Chen Jinren in Shanghai.
Premier Wen Jiabao struck a note of caution over the weekend, restating that the foundations for economic recovery were not solid. An influential economist also said in remarks published in official media that China's economy would not experience a rapid recovery because it would take time to find a new growth engine to replace sagging exports.
Shenzhen Development Bank surged by its 10 percent daily limit to 22.00 yuan after Ping An said it would increase its stake in the mid-sized lender to close to 30 percent, from under 5 percent. But Ping An shares were mixed, as some analysts deemed the deal expensive and not greatly value accretive to the insurer's banking aspirations.
Shares in Ping An and Shenzhen Development Bank had been suspended for a week to Monday. Ping An was up 2.3 percent at 46.13 yuanin Shanghai, while its Hong Kong-listed shares slid 3.2 percent to HK$57.15. The Shanghai-listed stock is trading at a 36 percent discount to its Hong Kong shares, compared with a 29.4 percent premium commanded by a broad-base of A-shares over their H-share counterparts.
The Shanghai Composite Index ended up 45.787 points at 2,789.549, regaining ground after posting its biggest daily drop in one month on Friday. Gaining Shanghai A shares outnumbered losers by 737 to 183, although turnover in Shanghai A shares dropped to 108.3 billion yuan ($15.9 billion), the lowest so far this month, from Friday's 123.3 billion yuan.
Hua Xia Bank rose 8.2 percent to 11.81 yuan, and Merchants Bank climbed 7.6 percent to 21.15 yuan. China Construction Bank (CCB) jumped 8.1 percent to 5.60 yuan after its chairman Guo Shuqing said in remarks carried by official media on Friday that the bank was interested in taking equity stakes in domestic insurer Happy Life Insurance and China Cinda Asset Management.
"The Shenzhen Bank deal brightened hopes for further consolidation in the financial sector," said Zheshang Securities analyst Zhang Yanbing. The benchmark Hang Seng Index was down 390.72 points at 18,498.96, after hitting a nine-month high above 19,000 points on Friday.
"The market had clearly run ahead of itself. 19,000 points was simply not sustainable and the market will continue to consolidate till its back at 18,000 points. On the other hand, there is still little selling pressure," said Francis Lun, general manager with Fulbright Securities. Turnover shrank to HK$65.3 billion from Friday's HK$79 billion, dragging down shares in bourse operator Hong Kong Exchanges & Clearing by 4 percent.
Other blue chips also gave way, with HSBC Holdings giving up 2.7 percent and China MMobile retreating 2.1 percent The China Enterprises Index of top mainland companies fell 1.9 percent to 10,877.54. Energy stocks slipped as crude oil price stayed weak after dropping off an eight-month high last week amid a stronger dollar and recent sharp gains. Crude price stayed below $72 per barrel in Asian trade Monday.
Offshore oil specialist CNOOC dropped 3.3 percent to HK$10.48, while Asia's largest oil and gas producer PetroChina fell by a similar percentage. Jewellery maker Tse Sui Luen surged as its shares emerged from a 2-1/2 year suspension following corruption charges against its founder and former chairman, who was later sentence to a jail term. The stock ended up 267.9 percent at HK$2.98.
Property company Poly (Hong Kong) Investments dropped after it said it would sell 230 million shares at a discount to a major shareholder to raise HK$776 million to fund investments, including building up its land bank. The stock was down 8.9 percent at HK$3.39, compared with its placement price of HK$3.45. Poly was among most heavily traded issues in the morning session with 1.76 billion shares changing hands.
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