Hong Kong shares slide, China lingers at 3-1/2-year low

Last Updated: Thu, Aug 30, 2012 09:48 hrs

(Updates to close)

* HSI down 1.2 pct, CSI300 slips 0.2 pct

* Turnover average ahead of Jackson Hole

* China banks weak after AgBank earnings disappoint

* Property developers sink on fears of sector curbs

By Clement Tan

HONG KONG, Aug 30 (Reuters) - Hong Kong shares closed at their lowest in a month on Thursday, with bank shares hurting after disappointing earnings from China's Agbank and property stocks slumping on media reports about imminent curbs on the sector.

Turnover stayed weak, in line with low trading interest across asset classes this week ahead of Friday's annual meeting of central bankers in Wyoming. The past two years, Federal Reserve Chairman Ben Bernanke signalled new policy easing.

Onshore Chinese markets on Thursday lingered at their lowest levels since early 2009, with the metals and mining sector weak as iron ore prices sank to near three-year lows on sagging Chinese demand.

Hong Hao, chief strategist at Bank of Communications International Securities, said that A-share underperformance is making more people look into whether there are bigger structural problems in the Chinese economy.

He suggested that for now, investors should stay defensive and brace for more downward revision of earnings.

"If you don't have to do anything, then don't -- unless you have a strong view on quantitative easing from the Fed," Hong said." But even then, I'm not risking my money for a 5 percent gain in the short term."

The Hang Seng Index shed 1.2 percent to 19,552.9, the lowest close since July 27. It opened below its 200-day moving average, now at 19,763.7, which triggered stop-losses in the index futures market at around 19,700. That caused losses to accelerate, traders said.

The CSI300 Index of the top Shanghai and Shenzhen listings slipped 0.2 percent to 2,211.4, the lowest close since March 2009. The Shanghai Composite Index ended flat as bourse volume rose 19 percent from Wednesday, almost in line with its 20-day moving average.

Mining companies were weak, with Citic Pacific down 4 percent. But there was some respite for beleaguered steel companies, which need iron ore. Angang Steel jumped 4 percent in Hong Kong.


Agricultural Bank of China (AgBank), the sector's third-biggest lender, fell on a bigger-than-expected margin decline. Banks' net interest margins measure loan profitability and are expected to shrink in the wake of China's interest rate liberalisation, which has narrowed spreads between what banks pay depositors and what they charge borrowers.

AgBank's Hong Kong shares dropped 2.7 percent to their lowest since July 16 and have fallen 10.5 percent from an Aug. 9 peak. In Shanghai, the stock slipped 0.4 percent.

Industrial and Commercial Bank of China (ICBC) and Bank of Communications (BoComm), which both posted first half results after Thursday trading, were also weak. ICBC sank 1.9 percent, while BoComm slumped 3.5 percent.

Both banks reported profit that slightly bettered expectations. Their non-performing loan ratios remained largely unchanged in the second quarter, compared to the previous quarter.

Among property stocks, Sino Land dived 5 percent to its lowest close in a month, leading the Hong Kong property sector lower on Thursday. Late on Wednesday, Sino Land posted a 6 percent fall in full year net profit.

Local media fanned speculation that new government curbs could hit Hong Kong property developers as soon as next week.

UBS analysts said in a note to clients they expect potential curbs to affect companies planning big launches, such as Sun Hung Kai Properties and Henderson Land. Sun Hung Kai lost 3.6 percent and Henderson 2.2 percent.

Policy controls may include designating a few sites that can only be sold to Hong Kong residents, converting several government land sites into public housing developments and tightening the special stamp duty tax, according to the UBS note.

Chinese developers were also softer after more signs of sector curbs on the mainland. Evergrande shed 3.6 percent to close at its lowest since Dec. 15 after Goldman Sachs removed the stock from its Asia Pacific "conviction buy" list. Goldman cited growing pressures on Evergrande's margins.

The state-run China Securities Journal cited on Thursday the chairman of the powerful state economic planning agency telling a Standing Committee meeting of China's parliament that the country must persist in implementing policies aimed at holding down prices and repressing speculative demand. (Additional reporting by Vikram Subhedar; Editing by Richard Borsuk)

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