Shares in China and Hong Kong eked out small gains in a cautious session on Friday, with wary investors expecting Beijing to further tighten liquidity by lifting bank reserve ratios. The Shanghai Composite Index closed up 0.71 at 3,067 points, its highest close since March 9 and gaining 1.8 percent for the week, although it has largely held within a narrow 2,900 to 3,100 range for nearly two months.
"The index is not likely to move much in the coming week. Today's rise is likely to be a technical rebound as there is no big change in the market," said Ren Chengde, analyst at Galaxy Securities. Ren said investors continued to focus on trading small caps because of a lack of funds flowing into the market.
"The market is still alert to tightening liquidity," he said. Analysts said the main index would likely continue range-bound trading in the short term, with immediate support seen at the 250-day moving average, now at 2,944 points, and resistance at the 125-day average at 3,096 points.
Gaining Shanghai stocks outnumbered losers by 694 to 174, while turnover fell to 103 billion yuan ($15.09 billion) from Thursday's 108 billion yuan. Jilin Expressway and Heilongjiang Transportation Development Co were by far the day's biggest gainers in their trading debuts, after previously listed Northeast Expressway was split in two.
Jilin Expressway surged 140 percent to 4.30 yuan, while Heilongjiang Transportation, which was also the most actively traded stock, jumped 109 percent to 4.34 yuan. "There are lingering worries about official liquidity tightening, so investors don't want to hold their positions too long," said Zhang Qi, senior analyst at Haitong Securities in Shanghai.
Zhang said the focus on small caps was pushing valuations of companies such as Jilin Expressway and Heilongjiang Transportation far above their peers. Hong Kong's benchmark Hang Seng Index ended up 0.2 percent at 21,370, near an eight-week closing high posted on March 17. For the week, the HSI edged up 0.8 percent, up for a fourth consecutive week.
Turnover fell for a second day to HK$58.7 billion ($7.6 billion) from HK$61.7 billion on Thursday. "Across Asia, even in China, shares are all up as sentiment remains positive," said Jackson Wong, investment manager at Tanrich Securities. "We don't see any negative news that could push down the market, except a possible rise in reserve requirements in China either this weekend or next."
Hong Kong shares managed a mild rally in the middle of this week, cheered by the US Federal Reserve's pledge to keep rates low for a prolonged period. Recent upbeat US jobs data also helped lift market sentiment, dealers said. "On the China side, investors are cautious as the weekend is coming; it's the China weekend phobia," said Ben Kwong, chief operating officer at KGI Asia. China usually announced changes in its key rates or bank reserve requirements late on Friday or at the weekend, dealers said.
The China Enterprises Index of top locally listed mainland Chinese stocks was up 0.4 percent. Chalco rose 3.3 percent. Its parent, Chinese aluminium maker Chinalco said on Thursday that it would set up a venture with Rio Tinto to sell iron ore from the Simandou project in Guinea to China.
SMIC fell 1.2 percent. China's top contract chipmaker plans to raise up to $500 million through a private equity placement or an issue of convertible bonds overseas. ZTE lost 4.8 percent, as China Mobile's plan to cut capital spending this year may hurt ZTE's earnings, dealers said. ZTE supplies equipment to China Mobile.
Among export counters, Europe-focused retailer Esprit fell 3.2 percent and Foxconn International dropped 1.9 percent, on renewed concerns Greece's debt problems may slow eurozone recovery. Outperforming the market, Chinese sports brand Li Ning rose 5.4 percent after giving an encouraging sales growth outlook for 2010.
Sinofert rose 3 percent, rebounding from Thursday's 4.8 percent drop, after a local paper reported the fertiliser producer expected to return to profit this year. Brightoil Petroleum was up 4 percent. The Ming Pao Daily News said the company had acquired its second oil tanker. Orient Overseas lost 2.9 percent after reporting a net loss for 2009.
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