Hong Kong shares rose on Monday, led by Chinese energy majors as higher oil prices and Kunlun Energy's surprise inclusion as the 50th Hang Seng Index component helped buoy interest in riskier counters. The Chinese consumer sector was a key underperformer, however, with department store operator Parkson Group sliding 3.4 percent after it posted underwhelming third quarter net profit late last Friday that also included negative same store growth.
The Hang Seng Index was up 0.7 percent at midday, set for a second daily gain and furthering a bounce from a one-month closing low seen last Thursday. The China Enterprises Index of the top Chinese listings in Hong Kong also rose 0.7 percent. On the mainland, the CSI300 Index of the top Shanghai and Shenzhen listings slipped 0.5 percent, while the Shanghai Composite Index shed 0.3 percent but held above the 2,000 point-level.
"Higher oil prices is one factor today, but most of the money today is short term, I don't think many will want to come into the market at this point with so much uncertainty this week," said Jackson Wong, Tanrich Securities' vice-president for equity sales. Talks to avert a fiscal crisis in the United States and a meeting of European policymakers discussing more aid for Greece are among key events that could drive market volatility in the week ahead.
Consequently, turnover in Hong Kong at midday on Monday was the lowest in almost a month, while Shanghai volume at midday neared 2012 lows. Shares of China Petroleum and Chemical Corp (Sinopec) climbed 2.2 percent in Hong Kong, also helped by a Citi upgrade from "neutral" to "buy" on an improvement in its domestic refining margins that could aid an earnings recovery in 2013.
Chinese natural gas provider Kunlun Energy jumped 4.3 percent, touching a record high in early trade, after the Hang Seng Index manager said the Chinese energy firm will become the 50th component of the benchmark index from December 10. Bucking broader strength on the day, Chinese consumer counters were hit by negative same store sales growth for Parkson Group, raising fears that the slowdown in the Chinese economy is hitting the sector more than expected. In a report on Monday, UBS analysts said Parkson's 42.3 percent year-on-year decline in third-quarter earnings was a result of slowing sales compounded by an acceleration in store expansion that led to a sharp increase in related expenses.
"As more department stores report negative SSS, we believe the sector valuation will be at much lower levels when negative operating leverage emerges," they said in the same report dated November 16, referring to same store sales. Weakness in the sector also extended to rival retailers seen adapting more effectively to the slowdown in the world's second-largest economy. Golden Eagle shed 2.3 percent. China's largest instant noodle producer Tingyi Holdings' posted third quarter net profit at midday that underwhelmed expectations and could compound weakness in the sector when trading resumes after lunch.
Tingyi shares were up 1.7 percent at midday in Hong Kong. Other key underperformers include Ping An Insurance, which fell 2.7 percent in Hong Kong after a media report said HSBC Holdings PLC is planning to sell its $9.3 billion stake in China's No 2 insurer.
At the midday break, HSBC Holdings confirmed it was in talks to sell its 15.57 percent stake in Ping An Insurance. HSBC's shares rose 1.4 percent. Ping An Insurance was down 0.9 percent in Shanghai, setting mainland markets on the way to a third-straight loss. Chinese property developers also were weaker after data showing housing prices rising 0.1 percent last month reignited fears that more government curbs could be introduced on the sector to dampen prices. Poly Real Estate slipped 2.1 percent.
Chinese premium alcohol producers Wuliangye and Kweichow Moutai declined 3.7 and 2.9 percent, respectively, on fears that their increased advertising expenditure could crimp margins if demand declines as Beijing crack down on corruption. Chinese media reported that Wuliangye bought 499 million yuan and Moutai 352 million yuan worth of advertisement slots on CCTV evening news programming in 2013. China's state television said it sold 15.8 billion yuan ($2.5 billion) of advertising spots for next year, the most in 19 years and up nearly 11 percent from a year earlier, amid expectations that the economy would quicken its recovery in 2013.
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