* HSI down 1.2 pct, flat on the week
* CSI300 sheds 1.9 pct, dives 3.6 pct this week
* Unicom in worst day in 3-1/2 years after Q3 earnings
* Resources sector among bigger losers
By Clement Tan
HONG KONG, Oct 26 (Reuters) - Hong Kong shares snapped a
ten-day winning streak on Friday, as the Hang Seng Index
retreated from 2012 highs, dragged down by China Unicom's 7.6
percent slump after posting disappointing third quarter
The Hang Seng Index lost 1.2 percent on the day,
closing flat on the week, snapping seven weeks of gains. The
China Enterprises Index of the top Chinese listings in
Hong Kong shed 1.6 percent on the day and dropped 2.2 percent
The CSI300 Index of the top Shanghai and Shenzhen
listings lost 1.9 percent to close at its lowest since Sept. 26.
The Shanghai Composite Index shed 1.7 percent.
Both indices broke below a tight 70-point trading they had
held to so far this month. On the week, the CSI300 shed 3.6
while Shanghai lost 2.9 percent, in their first weekly loss in
Turnover on both Hong Kong and China markets was lower than
"I still think there is potential for more gains in Hong
Kong, the market is consolidating strong gains now, but inflows
are picking up and investors are adding beta," said Alan Lam,
Julius Baer's Greater China equity analyst.
In Hong Kong, China Unicom recorded its worst
daily loss since April 1, 2009 when it slumped 8.1 percent. The
country's second-largest mobile phone operator posted a 27
percent rise in third-quarter net profit, lagging market
China Unicom is now down more than 22 percent this year
after surging 47 percent in 2011. This compares to the 16.9
percent gain on the Hang Seng Index and the 5.2 percent rise on
the China Enterprises Index for 2012.
But it is still trading at a 31 percent premium to its
historical median 12-month forward earnings multiple, according
to Thomson Reuters StarMine, suggesting further weakness could
be in store as investors rotate into growth-sensitive counters
with cheaper valuation.
Positive earnings, along with more data confirming a
stabilization in the Chinese economy could make counters such as
Bank of China (BOC), which was the first among China's
"Big Four" banks to post earnings on Thursday, a popular option.
On Friday, BOC reversed early gains to end down 0.3 percent
after the country's fourth-largest lender bettered expectations
with a strong third-quarter corporate earnings showing after
cutting back on bad-loan provisions.
Bank of China is now up 9.8 percent this year and currently
trading at a 38 percent discount to its historical median
12-month forward earnings and a 46 percent to its historical
median 12-month forward price-to-book value, according to
Its "Big Four" rivals, Agricultural Bank of China (AgBank)
slipped 1.5 percent and China Construction Bank (CCB)
shed 1 percent ahead of their expected third-quarter
earnings later on Friday.
ONSHORE CHINA MARKETS UNDERPERFORM, AGAIN
Offshore Chinese markets outperformed onshore peers for a
third straight week. Much of the A-share underperformance this
week was driven by weakness in the resources-related sector,
which has driven the recovery in mainland markets after a
one-week holiday at the start of October.
On Friday alone, the Shanghai material sub-index
slumped 3.2 percent after Maanshan Iron & Steel's
bigger-than-expected third-quarter loss sparked more profit
taking on recent outperformers in the sector.
Both the CSI300 and Shanghai Composite indices were standout
underperformers in Asia on the day and were cited for worsening
losses in other Asian stock and currency markets, but ended the
day off its lows.
Retails investors were partly spooked by Chinese media
reports on Friday that fund managers were not too optimistic
about prospects for the fourth quarter after consultancy data
showed funds posted total loss of around 75 billion yuan ($12.02
billion) in the third quarter.
Maanshan slumped 4.4 percent in Shanghai, while larger
sector peer Angang Steel lost 4 percent in
Hong Kong and 4.7 percent in Shenzhen.
Aluminum Corporation of China (Chalco), which was
up 11 percent on the month before Friday, slumped 5.1 percent in
Hong Kong, partly hurt by news that commercial stocks of primary
aluminum in China doubled this year from the end of last year on
Thursday even as demand sagged.