Hong Kong, China shares retreat, Tencent hit after earnings miss

Last Updated: Thu, Nov 15, 2012 05:20 hrs

* HSI -1.0 pct, H-shares -1.2 pct, CSI300 -0.6 pct

* Esprit jumps 20 pct after ex-chairman raised stake

* New China Life Insurance slides after MSCI China non-inclusion

* China railway climb, 2013 govt investment reportedly higher vs 2012

By Clement Tan

HONG KONG, Nov 15 (Reuters) - Hong Kong shares retreated on Thursday, dragged down by poor third quarter earnings by Chinese internet giant Tencent Holdings, while markets on the mainland were weaker as the country unveiled its new top leadership.

The Hang Seng Index went into the midday trading break down 1 percent at 21,237.1, but off the day's lows, bouncing off chart support seen at about 21,200. Tencent Holdings slid 4.9 percent.

The China Enterprises Index of the top Chinese listings in Hong Kong shed 1.2 percent. The Shanghai Composite Index and the CSI300 Index of the top Shanghai and Shenzhen listings each slipped 0.6 percent.

"Losses today were tracking weakness on Wall Street last night, but recent inflows into China equities won't leave although they might slow down a little from here because of concerns over the U.S. fiscal cliff," said Alan Lam, Julius Baer's Greater China equity analyst.

"Hu Jintao not staying on as military chief for any longer than his term as president suggests power will be concentrated with Xi and should assure a steady pace of reform," Lam added.

China's ruling Communist Party unveiled its new leadership line-up on Thursday to steer the world's second-largest economy for the next five years, with Vice President Xi Jinping taking over from outgoing President Hu Jintao as party chief.

Chinese railway and construction material counters rose after the 21st Century Business Herald newspaper reported that the Ministry of Railways has set a preliminary investment target of 530 billion yuan for China's railway construction next year, exceeding this year's 516 billion yuan target.

In Hong Kong, China Railway Group rose 1.7 percent, while Anhui Conch Cement rose 1 percent and China National Building Material climbed 1.2 percent.

Esprit Holdings outperformed, surging 20 percent after its former chairman increased his holding in the Europe-focused fashion retailer, fuelling hopes he would play a bigger role in the company.

But other growth-sensitive sectors, such as resources, that led gains on Wednesday were all weaker. In Hong Kong, Aluminum Corporation of China (Chalco) shed 2 percent, while Angang Steel slipped 0.6 percent.


Shares of Tencent Holdings fell to their lowest level since end-September after it reported that efforts to expand into new businesses hit margins and the number of fee-paying users for its Internet services fell.

Tencent has now lost more than 8 percent from a Nov 2 high, but is still up 63 percent this year. This compares to the 15 percent gain for the Hang Seng Index.

New China Life Insurance slumped 7.4 percent in heavy volumes to its lowest since Sept. 27.

A trader at a European brokerage said investors were bailing out on the stock after it failed to be included as a component stock on the MSCI China index.

Counters that will be excluded from the MSCI China index after market close on Nov 30 were mostly weaker. China Rongsheng lost 2 percent, while China Yurun Food declined 1.4 percent.

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