Bird flu jitters sink Hong Kong shares to 4-mth low, China airlines skid

Last Updated: Fri, Apr 05, 2013 09:20 hrs

* HSI -2.7 pct, H-shares -3.1 pct; China shut

* HSCE below 200-day MA for the 1st time since November

* BOJ radical easing triggers Hong Kong outflows

* Airlines sector slump as China bird flu fears escalate

By Clement Tan

HONG KONG, April 5 (Reuters) - Hong Kong shares finished a holiday-shortened week at their lowest close since Nov. 28, as fears of a bird flu outbreak sparked a broad selloff, and further falls looked possible after the benchmark index broke below a key technical support.

Traders said losses were exacerbated by an exit of funds after the yen slumped to a 3-1/2-year low following the Bank of Japan's aggressive monetary easing announced on Thursday, on which Hong Kong markets were shut for a holiday.

Mainland China stayed shut on Friday for a public holiday and will resume trading on Monday. Both markets only traded three days this week, with Hong Kong having also been closed on Monday for Easter.

The Hang Seng Index ended down 2.7 percent at 21,726.9. News about deaths in China from bird flu triggered memories of Asia's outbreak of severe acute respiratory syndrome (SARS) 10 years ago. Due to SARS, the Hong Kong benchmark slumped 18 percent from a December 2002 peak to an April 2003 trough.

The China Enterprises Index of the leading Chinese listings in Hong Kong dived 3.1 percent on Friday to 10,429.3, closing below its 200-day moving average, now at about 10,508.9, for the first time since Nov. 16.

Losses in Hong Kong came as Japanese shares jumped to near five-year highs and government bond prices rose sharply, with the long-end of the yield curve inverting as the Tokyo Stock Exchange twice halted trade in Japanese government bond futures.

The two Hong Kong indexes shed 2.6 and 4.3 percent this week, respectively, and both closed at their lowest since Nov. 28. The Shanghai Composite Index and the CSI300 of the top Shanghai and Shenzhen A-share listings, which didn't trade after Wednesday, were down 0.5 percent for the week.

On Friday, Hong Kong's turnover was at its heaviest in more than two weeks, but was still some 40 percent off a Feb. 4 peak. Short selling interest accounting for 12.5 percent of total turnover, higher than the historic 8 percent average.

"Everything is combining today to hurt the market," said Alfred Chan, chief dealer at Cheer Pearl Investment in Hong Kong. "The bird flu issue is at the top of people's minds now."

Chinese authorities slaughtered over 20,000 birds on Friday at a poultry market in the financial hub Shanghai as the death toll from a new strain of bird flu rose to six, spreading concern overseas.

The strain does not appear to be transmitted from human to human but authorities in Hong Kong raised a preliminary alert and said they were taking precautions.

Chinese airlines were the biggest percentage losers on a day of fears about diminished demand for air travel. Air China slumped 9.8 percent, its worst single-day loss in nearly four years.

China Southern Airlines and China Eastern Airlines each slid more than 8 percent. Hong Kong's Cathay Pacific Airways fell 4.1 percent to its lowest close since Sept 6.

Chinese oil majors were also hit by lower oil prices, which were on course for their biggest weekly decline in a month. CNOOC Ltd fell 3.9 percent on the day and has now slumped 14.4 percent in 2013.

CNOOC has underperformed its rivals this year. PetroChina , after sliding 4.1 percent on Friday, is down 10.3 percent in 2013 China Petroleum and Chemical Corp (Sinopec) is down 0.3 percent this year after Friday's 3.5 percent decline.


Italian luxury brand Prada SpA slipped 1.5 percent ahead of its 2012 corporate earnings results later in the day. Up 4.3 percent in 2013, Prada is currently trading at a 14 percent premium to its historic 12-month forward earning multiple, according to Thomson Reuters StarMine.

In the last 30 days, three out of 30 analysts who cover Prada downgraded their 2012 final earnings-per-share estimates by an average of 2.8 percent, according to StarMine.

Of the 91 percent of Hong Kong-listed companies that have reported earnings, more than half have missed expectations, with the energy, material, consumer staple and discretionary sectors among the most disappointing.

Chinese property stocks slumped after the 21st Century Business Herald newspaper reported on Thursday that about 20 projects in Beijing have been banned from an online property registration system as authorities step up efforts to tighten restrictions on the high-end housing market.

China Resources Land slid 4.1 percent to its lowest in almost two weeks and is now down 0.5 percent on the year after surging 69 percent in 2012. Chinese property stocks have been caught in a jittery spell since the central government announced guidelines for new curbs at the start of March.

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