Hong Kong and China shares gained on Tuesday, as investors bought into blue chip stocks ahead of earnings but low turnover suggests they remained reluctant to buy in a big way. Any signs of resolution of the US debt ceiling impasse could combine with the slew of first half corporate earnings announcements among heavyweight blue chips could help lift both markets going into August, analysts say.
"From a foreigner's point of view, I just want the US debt situation to be resolved, and most people seem to be betting that will happen in some form," said Jackson Wong, a vice-president at Tanrich Securities. "People are buying into blue chips ahead of earnings, and it's a pretty broad base of people buying out there," he said.
The Hang Seng Index clawed back Monday's losses, closing up 1.3 percent at 22,572.1 points but volumes were a low HK$62.6 billion, more than 5 percent below its 20-day moving average. Chinese banks, trading at valuation troughs last seen during the 2008 financial crisis, were among the most traded and the biggest percentage gainers among Hang Seng components.
Bank of China, Industrial and Commercial Bank of China and China Construction Bank jumped about 3 percent apiece. Large-cap names and benchmark heavyweights China Mobile and Hutchison Whampoa also gained on relatively healthier volumes and buyers were mosty private banks and other institutions, looking to position for a market rebound as corporate earnings get underway, traders said.
Both stocks, which together account for more than a tenth of the Hang seng, rose above their 200-day moving averages last week drawing in more investors who were chasing momentum plays. Chinese railway equipment extended Monday's slide after the worst train accident in China since 2008 over the weekend. China South Locomotive lost 1.3 percent in volumes exceeding five times its 30-day average.
Its Shanghai listing and China Northern Locomotive both lost about 4 percent each. Analysts expect the huge blow over the last two sessions could ease in the short to medium term, but pointed out that they had been not doing well for the bulk of this year before Saturday's catastrophic accident.
Even before Monday's plunge, China South Locomotive's Hong Kong listing has declined more than 38 percent since hitting its 2011 peak in early January. The Shanghai Composite Index edged up 0.5 percent to 2,703.0 points on Tuesday, with A-share turnover hitting its lowest in a month as investors stayed away from a fragile market that has been battered over the last few sessions.
Chinese oil giants and benchmark heavyweights, PetroChina Co Ltd and Sinopec Corp were among the biggest supports to the Shanghai Composite. Tuesday's gains helped lift PetroChina from technically oversold conditions ahead of the earnings season.