China shares sink on fundraising fears, Hong Kong weak too

Last Updated: Tue, Mar 26, 2013 04:50 hrs

* HSI -0.3 pct, H-shares -0.7 pct, CSI300 -1.7 pct

* Everbright Securities private placement stokes IPO jitters

* Belle, Li Ning down after earnings, GOME rises

* AgBank, Bank of China down ahead of 2012 earnings

By Clement Tan

HONG KONG, March 26 (Reuters) - China shares sank, weighing down Hong Kong markets, on fears about a possible wave of new stock-offerings by brokerages after Everbright Securities obtained approval for a private share placement.

Everbright sank 3.6 percent in Shanghai after the China Securities Regulatory Commission approved plans for it to raise up to 8 billion yuan ($1.29 billion) in the mainland to boost the company's core capital, IFR reported.

The CSI300 of the leading Shanghai and Shenzhen listings went into the midday trading break down 1.7 percent, while the Shanghai Composite Index was off 1.5 percent. If losses persist, this would be their respective worst daily showing since March 4.

The Hang Seng Index slipped 0.3 percent, while the China Enterprises Index of the top Chinese listings in Hong Kong shed 0.7 percent. Aside from possible China fundraising moves, another factor erasing some of Monday's gains was renewed concern about Cyprus.

"The fear is that Everbright's private placement is the first of many fundraising attempts, which could inevitably involve a public offering," said a Shanghai-based trader with a major Chinese brokerage.

The Chinese central bank's decision to drain 32 billion yuan from the money markets through 28-day bond repurchase agreements triggered hatter about a possible rate hike, another trader said.

Mainland markets were also hurt by a report in the official China Securities Journal that Chinese banks have restricted the pace and scale of lending to the property sector as part of greater governmental risk controls.

The same report also said rural banks have been required to reduce their lending for property development. The banking regulator is also working on more directives to reduce systemic risks in the property sector.

Mid-sized lender China Minsheng Bank sank 4 percent in Shanghai and 1.1 percent in Hong Kong, trimming 2013 gains to 34 and 16 percent, respectively.

Losses for Everbright on Tuesday took its shares to the lowest in a week. Citic Securities , China's largest-listed brokerage, fell 2.2 percent in Hong Kong and 2.5 percent in Shanghai.

Haitong Securities fell 3.9 percent in Shanghai and 0.9 percent in Hong Kong ahead of its 2012 corporate earnings expected later in the day. The stock is down 16 percent in Hong Kong in 2013, compared with a 5 percent slide for the China Enterprises Index.

In the last 30 days, two of 16 analysts who follow Haitong have downgraded their earnings-per-share estimates by an average of 32 percent, according to Thomson Reuters StarMine.

In 2012, China's 114 brokerages together earned less than Wall Street bank Goldman Sachs did, and the combined profit for the Chinese firms was down 16 percent from a year earlier, industry data showed in mid-January.


Corporate earnings remained a big focus on Monday, with at least 38 Hong Kong-listed companies due to report final 2012 results later in the day. Of the 58 percent of companies that have reported in Hong Kong, 52 percent have missed expectations, according to StarMine.

China's top footwear retailer Belle International fell 1.6 percent, while sportswear retailer Li Ning tumbled 4.3 percent after both posted disappointing 2012 results.

GOME Electrical Appliances, however, jumped 3.5 percent after China's second-largest electric appliance retailer posted a smaller-than-expected full-year loss, while also providing aggressive guidance for 2013.

Agricultural Bank of China (AgBank) slipped 0.5 percent in Hong Kong and 1.4 percent in Shanghai, while Bank of China shed 0.6 percent in Hong Kong and 0.7 percent in Shanghai ahead of their 2012 earnings.

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