Hong Kong blue chips surrendered earlier gains on Thursday, as investors locked in profits after the market neared a key resistance mark, but China plays rose 0.4 percent, as a broker recommendation and earnings surprises lifted shipping plays.
China Shenhua Energy and other coal shares, bolstered by a positive outlook on coal prices, also contributed to gains in Hong Kong-listed mainland companies. The market posted strong gains in the morning, inspired by three straight days of gains on Wall Street. It reversed course in the afternoon, having reached a day high near 22,800 points, a level that brokers had predicted would trigger profit-taking.
"People don't want to take risky positions at this point," said Jackson Wong, investment manager at Tanrich Securities. "I don't think the market will break 23,000 this week. Friday may be another profit-taking day." But investors with longer-term horizons were unrattled.
"All the money that wants to be out is already out," said Desmond Tjiang, fund manager at Fortis Investment Managers, who added he was maintaining his positive views on Hong Kong through the end of the year.
"China and Hong Kong fundamentals are still intact; 80 to 90 percent of the earnings results are surprising on the upside." The benchmark Hang Seng Index closed down 0.4 percent, or 97.31 points, at 22,439.36. The China Enterprises index of H shares, or Hong Kong-listed shares in mainland companies, gained 52.29 points to 12,678.75.
Mainboard turnover was HK$85.2 billion (US $10.9 billion), easily eclipsing Wednesday's HK$76.0 billion. Gains in most mainland financials evaporated in the afternoon, but China Merchants Bank closed the day 2.5 percent higher at HK$29.05 ahead of its earnings report expected later in the day.
Bank of China finished down 0.5 percent at HK$3.89 and Industrial & Commercial Bank of China, a top performer on Wednesday, was off nearly 1 percent to HK$4.68.
Among the bright spots, shipping stocks were led by China COSCO Holdings, which surged nearly 8 percent to HK$13.48 after Goldman Sachs upgraded the shipping conglomerate to buy from neutral and added it to its conviction buy list. China COSCO's container leasing and terminal operating arm, COSCO Pacific Ltd, leapt 2.2 percent to HK$20.15.
Pacific Basin, a bulk shipping line, reached a life high before racing up a further 6.9 percent to HK$12.98, having posted forecast-beating results earlier in the week. Adding to the positive sentiment in the sector, China Shipping Container Lines (CSCL) reported its first-half net profit reached 1.16 billion yuan ($153.4 million), compared with 81.2 million yuan a year ago. CSCL shares were suspended from trade on Thursday.
Coal stocks were again a favoured sector, a day after Credit Suisse issued a positive report on the industry. China Shenhua Energy bolted 3.1 percent to HK$29.75 and Yanzhou Coal ramped up nearly 2 percent to HK$13.1.