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Hong Kong, China shares tepid; policy support buoys railway sector

Source : REUTERS
Last Updated: Thu, Jul 25, 2013 05:00 hrs

* HSI -0.3 pct, H-shares -0.1 pct, CSI300 +0.1 pct

* Beijing's "mini stimulus" buoys railway, cement, steel sectors

* A-share market weighed by planned $7.5 bln share placement

By Clement Tan

July 25 (Reuters) - Railway-related stocks outperformed in Hong Kong and China on Thursday after Beijing pledged more funding to support rail construction in a series of measured moves to stem the slowdown in the world's second-largest economy.

Their gains stood out in a tepid market. The A-share market was further weighed by a planned $7.5 billion private share placement, raising concerns the largest equity offering in a year could put pressure on tight liquidity conditions.

At midday, the Hang Seng Index was off 0.3 percent and the China Enterprises Index edged down 0.1 percent, both slipping after closing on Wednesday at their highest since early June.

The CSI300 of the leading Shanghai and Shenzhen A-share listings was up 0.1 percent, while the Shanghai Composite Index slipped 0.1 percent in fairly weak bourse volumes.

Index losses had briefly accelerated after the Chinese labour ministry warned the economy faces mounting employment pressures in the future.

Beijing's war against industrial overcapacity was cited as a reason. These comments came a day after a private preliminary survey of manufacturing activity in the mainland showed employment at its weakest since March 2009.

"I think you can expect more of these types of policy support from Beijing. They are making it clear they are serious about restructuring the economy, but I don't think we have tested their bottom limit for growth yet," said Cao Xuefeng, a Chengdu-based head of research for Huaxi Securities.

On Thursday, Chinese railway counters rose for a third-straight day. China Railway Construction jumped 3.6 percent in Hong Kong to its highest since May 9, while its Shanghai listing jumped 5.1 percent and has now soared more than 13 percent this week.

Building material counters were also stronger on hopes that railway construction will buoy physical demand. Anhui Conch Cement jumped nearly 4 percent each in Shanghai and Hong Kong. Angang Steel spiked 4.3 percent in Hong Kong and 3.3 percent in Shenzhen.

China's support for the railway industry was part of series of targeted policy measures the country's cabinet announced late on Wednesday, which also included an elimination of taxes for small firms and more help from banks for exporters.

Shares of China Rongsheng, the country's largest private shipbuilder which asked for financial help from Beijing last month, surged 6.3 percent in Hong Kong as investors rushed to cover short bets.

The Chinese coal and banking sectors, which have broadly risen in the last month, were on the defensive and were key index drags in Hong Kong.

Bank of China slipped 0.6 percent, while China Shenhua Energy shed 2.1 percent after both had closed on Tuesday at their highest since mid-June.

Sino Pharmaceutical tumbled 4.2 percent to HK$5.54 after a major shareholder sold 100 million shares priced at HK$5.43 each, suggesting demand for the placement was relatively healthy.

BOE Technology dived 6.3 percent in Shenzhen. IFR reported that the company plans to raise up to 46 billion yuan ($7.50 billion) from a private placement to not more than 10 institutional investors in what could become the largest equity offering in the A-share market in a year.




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