Hong Kong Review – HK Shares Slumped As China Data Hinted At Soft Landing

Hang Seng index resumed its slide to as low as 21,294.54 or down 179.06 points (-0.8%) as China’s data and overnight statement from FOMC prompted investors to book profit even further. A move by China Banking Regulatory Commission also hurt banking stocks.

CBRC instructed banks to move loans to trust companies back to their balance sheet by the end of next year. This move plugs the loophole that had enabled banks to get around lending quotas. Banks sometimes make loans off their books to trust companies who later repackage the funds as wealth-management products. China Construction Bank fell 2.68%, ICBC fell 2.54%, BOC HK and BOC each fell 1.96% & 1.92%, respectively, while Bank of Communication shed 1.72%.

A flood of Chinese data hinted further easing in China’s growth. PPI was at +4.8%, slowing from June’s +6.4%, while CPI was still rising at +3.3% from June’s +2.9%, due to recent flooding that struck China, driving food prices higher. Industrial output was up 13.4% (yoy) in July, higher than consensus of +13.2% but slower than 13.7% in June. Retail sales climbed 17.9% (yoy), slower than 18.3% rise in June, and below consensus of 18.4%. Urban fixed-asset investment growth during January-July rose 24.9%, slowing down from 25.5% January-June period. The final pieces of the data, new loans and mortgage related lending fell to 533 billion yuan and 126 billion yuan. Both fell from their prior month’s data, suggesting more evidences of moderation.

HKEX released its earnings for the second quarter period which saw net profit declining 16% (yoy) as daily trading volume dropped along with its investment income. HKEX settled 2.05% lower at HK$129.10 at the end of the day.

Hutchison Whampoa, on the other hand, leapt nearly 6% after its Managing Director Canning Fok and Chief Financial Officer Frank John Sixt bought a total of 1.15 million HW shares on August 6th, a day after the company posted its first-half results. HW settled at HK$61.85.

China Overseas Land and Investment reported 1H10 net profit of HK$5.07 billion from a year earlier HK$3.04 billion. The company proposed 1H dividend of HK$0.10 up from HK$0.07 a year earlier. Its sales forecast for 2010 sales is maintained despite tightening measures from China. COLI ended down 1.45% before the results were released.

PetroChina is expected to see net profit rose by 36% (yoy) to HK$68.4 billion yuan during 1H10, according to Nomura Securities. A rise of 49% in oil price was the factor behind the forecast. The target is set at HK$13.70 with BUY rating. PetroChina closed at HK$8.77 or down 1.02%.

Esprit Holdings downgraded to Neutral from Buy by UBS; meanwhile BOC-HK launched mobile banking services.