Hong Kong's benchmark index closed at a one-month high on Wednesday on optimism that the US central bank could launch a new round of monetary stimulus, although strong technical resistance capped gains for a second day this week. HSBC Holdings Plc was the top boost to the Hang Seng Index, which rose 0.5 percent to 19,518.85, its highest since May 15. Gains were thwarted by its 200-day moving average, currently at about 19,591, a level that also limited gains on Monday.
Mainland Chinese markets slipped for a second-straight day. The Shanghai Composite Index declined 0.3 percent, while large cap-focused CSI300 Index closed down 0.2 percent, moving further below its 100-day moving average. Trading interest remained lacklustre with turnover in Hong Kong declining for a third day and approaching the year's lows in Shanghai.
Investors were cautious ahead of China's June HSBC flash PMI, expected early on Thursday, the earliest indicator of manufacturing activity in the world's second-largest economy. "I don't think money has left Hong Kong. Investors have been sitting on cash," said Peter So, CCB International Securities' Hong Kong-based co-head of research.
But on Wednesday, Chinese developers and brokerages, among the best performers this year, were mostly weaker in both Hong Kong and mainland Chinese markets as investors took some profits. China Overseas Land & Investment Ltd suffered a second-straight loss, slipping 1.8 percent. It is still up more than 32 percent this year. Haitong Securities shed 0.7 percent in Hong Kong and 1.7 percent in Shanghai. The Macau gaming sector was strong.
The newest Hang Seng Index component, Sands China rose 3.3 percent, while Galaxy Entertainment jumped 6.6 percent and Wynn Macau gained 5 percent. China Unicom tumbled 3.9 percent to HK$10.40 in Hong Kong, its lowest since June 8 after the mainland's second-largest telecom provider posted late on Tuesday May 3G subscriber growth that disappointed expectations.
Unicom's smaller peer, China Telecom was also weak, shedding 2.5 percent, but its larger rival, China Mobile inched up 0.2 percent. China Mobile is the only one among the three in positive territory for the year. In a note to clients on Wednesday, Bank of America-Merrill Lynch analysts slashed their 2012 profit estimates for Unicom by 18 percent and cut its price target for Unicom's Hong Kong listing to HK$16.20 from HK$19, while maintaining a "buy" rating.
China Unicom is down 36 percent so far in 2012 after surging 47 percent last year as investors flocked to the perceived safety of its earnings growth, primarily driven by its 3G business. Of the three Chinese telcos, China Mobile, up 9 percent this year, is the only one trading at a discounted forward 12-month earnings multiple. At 10.4 times, it is trading at a 12 percent discount to its historical median, according to Thomson Reuters StarMine. Unicom is currently trading at 24.6 times, 20 percent more than its historical median, while China Telecom is trading at 13.9 times, 12.2 percent more than its historical median.