Thursday, August 12, 2010

HK stocks fall on global econ worries; Shanghai down

HONG KONG/SHANGHAI: Hong Kong shares fell on Thursday, Aug 12 as mounting doubts about global economic growth gave investors a reason to book profits after a recent rally took the benchmark index to a 3-1/2-month high.

China's key stock index, the Shanghai Composite, pared some of its earlier losses and was down 0.8 percent, outperforming
other regional markets.

Stocks found some support after regulators in China hiked insurance companies' maximum investment ratio in shares and funds
to a combined 25 percent of total assets, but weak overseas markets limited gains.

The China Insurance Regulatory Commission (CIRC) raised domestic insurers total investment ratio in funds and shares to a
maximum of 25 percent, while allowing them to invest up to 15 percent in overseas capital markets.

The Shanghai Composite is up 12 percent from its July low as expectatons of policy easing, attractive valuations and moderating but still robust economic growth in China prompted a move back in Chinese shares.

"The market is confident that tightening measures have peaked but expectations for policy loosening still need a while to develop," said Wang Aochao, analyst at UOB Kay Hian in Shanghai.

Wang said he expects the index will likely rebound to 2,700-2,800 in the near term but said A-shares did not have a great catalyst to jump higher.

Property issues were broadly higher, extending Wednesday's gains. Gemdale was up 0.9 percent while Poly Real Estate, another
major developer, rose 1.7 percent.

Heavily weighted banking shares fell, dragging the broader market lower. Shares of ICBC were down 1.2 perent while Bank of
Communications fell 1 percent.


HK SLIDES
The Hong Kong market fell, tracking other Asian bourses, as concerns about a slowing global recovery fueled a sell-off in risky assets.


Asian stocks, high yielding currencies and commodity prices slid following news of a surprisingly large U.S. trade deficit and a dowgrade of Britain's growth forecast by the Bank of England.

Hong Kong's benchmark Hang Seng Index fell 1.4 percent to 20,987.1, slipping further from a 3-1/2-month high hit on Monday.
A 15 percent rally since the May low had taken the index into overbought territory earlier this week, with the relative strength index over 75. The index has fallen 4 percent since, bringing the RSI to a more neutral level of 50.

Economic worries have served as an excuse for the continued correction in local markets, said Marco Mak, analyst at Tai Fook
Securities.

The Hang Seng's slide took it below key support levels - the 200-day moving average at 21,044 and a 50 percent retracement of
the November 2009 to May 2010 slide. The next short-term support for the index is around the June high of 20,938.
Shares of Cathay Pacific fell 3.6 percent.

Cathay shares are the top performers on the Hang Seng index this year mostly due to a near-30 percent surge since late May on
the back of a strong rebound in international air travel.

Angang Steel fell 5.4 percent, leading a 1.8 percent drop on the China Enterprise Index. - Reuters


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