Friday, December 31, 2010

HK shares ends yr below 10-yr average, Shanghai up

HONG KONG/SHANGHAI: Hong Kong and Shanghai stocks gained ground in the last trading day of 2010, with a stronger yuan fuelling demand for Chinese assets.

Hong Kong shares edged higher in a shortened session on Friday, Dec 31 for a third consecutive gaining session, ending the year up 5.32 percent but below the 10-year average gain of about 7.6 percent.

The Hong Kong market lagged its main regional competitor in Singapore, where stocks rose 11 percent in 2010.

"Too many IPOs had hit overall market performance for the year as they soaked up quite a bit of liquidity," said Ample Capital analyst William Lo.

The benchmark Hang Seng Index ended Friday up 0.16 percent at 23,035.45, its highest year-end close since 2007. The index posted a gain of 0.12 percent for the month and finished the week up 0.88 percent, its best weekly gain in five weeks.

The China Enterprises Index of top locally listed mainland Chinese companies gained 0.84 percent to 12,692.43, ending the year down 0.8 percent. The index finished the month 0.98 percent lower, but was 2 percent higher on the week, its best week in two months.

"Appetite for Chinese shares increased, with China assets looking appealing as the yuan went up," said Conita Hung, head of equity research of Delta Asia Financial. "Looking head, the market may move towards 23,600 on new year buying and as the Chinese currency appreciates further."

The yuan hit a high against the U.S. dollar on Friday, surpassing 6.60 per dollar for the first time since its was revalued in 2005.

China Communications CONSTRUCTION [] Co Ltd rose 3 percent to its highest in more than two weeks after the group said it planned to issue up to 3.5 billion A shares on the Shanghai bourse, with part of the proceeds to be used to acquire the rest of CRBC International Co Ltd.

Guangzhou Automobile Group Co Ltd rose 2.3 percent to a more than three-week high after the automaker said it would buy 50 percent of the registered capital of Wuyang-Honda Motors (Guangzhou) Co Ltd for 444.8 million yuan and the Wuyang Trademarks for use in motorcycles and auto parts for about 31 million yuan.

BANKS, INSURANCE STOCKS UP IN SHANGHAI

Chinese stocks rebounded close to 2 percent on Friday in thin trading and an upbeat holiday mood, finishing off a lacklustre year with the hope that 2011 will treat equity investors better.

The benchmark Shanghai Composite Index rose 1.76 percent on the day to 2,808.08 points as stocks rose across the board, but the index still fell by 14.3 percent on the year, making it one of the world's worst performers this year as policy uncertainty cast a shadow over the market.

"The last-day rebound could partly reflect investor optimism toward stocks in the new year as some have already started building positions," said Zhang Fan, strategist at Tebon Securities in Shanghai. "Stocks are likely to rise next year as tightening fears have been priced in."

But some worry that a slew of tightening measures that are likely to be front-loaded in the first half of 2011 could weigh on the market, with the latest Reuters fund poll showing that fund managers are cutting their suggested equity weightings over the next three months.

Still, fund managers expect the Shanghai index to rise about 6 percent during the first quarter of 2011, as they suggest more exposure to financial and energy stocks, according to the poll.

Banking stocks rose on Friday, led by a 3.1 percent jump in Agricultural Bank of China Ltd, the country's biggest rural lender. Energy shares also gained, with PetroChina Co Ltd, the country's largest oil company, up 0.6 percent.

POLICY UNCERTAINTY

China's stock market fell 0.4 percent in December and is down 12 percent from its November peak, having been knocked down by a stepped-up government campaign against inflation, including two interest rate rises, fresh real estate curbs and a slew of increases in bank required reserve ratios.

However, some argue that the market could benefit from an expected acceleration in yuan appreciation as the policy change, aimed at fighting inflation, could introduce more liquidity into equities.

"Yuan appreciation plus higher interest rates, will inevitably boost money inflows next year," said Tebon Securities' Zhang. "With China likely to maintain real estate curbs, the stock market is the most attractive place to go, especially when valuations of blue-chip stocks are near historic lows."

Insurers rose on Friday, led by China Pacific Insurance (Group) Co Ltd, which gained 2 percent after private equity investor Carlyle Group sold an $860 million stake in the company, exiting its investment and removing one of the overhangs on the stock.

Yanzhou Coal Mining Co Ltd jumped 4.4 percent after saying it would increase its investment in Yancoal Australia Pty Ltd by A$909 million ($923 million), paving the way for a planned listing of the unit in Australia. - Reuters


No comments:

Post a Comment