HK, Shanghai stocks slightly lower; HSBC falls 4 pct
Trade the News
Saturday may 08, 2010 03:36:05 AM GMT
* Hang Seng, Shanghai down 0.7 pct
* Stocks rebound from oversold conditions
* L’Occitane drops as much as 8 pct on HK debut
(Updates to midday)
By Vikram S Subhedar and Farah Master
HONG KONG/SHANGHAI, may 7 (Reuters) – Shares in Hong Kongwere down slightly but recovered from the morning’s lows onstrong volumes as bargain hunting was seen in bank and propertystocks after heavy selling in recent sessions.
“The market had been seriously oversold and there was arebound from the recent weakness, particularly on anticipationthat the U.S. market may rebound after a selloff,” said AndrewTo, a sales director at Taifook Securities.
The benchmark Hang Seng was about 0.5 percent lower afterfalling 2 percent at the open, after U.S. stocks plunged as asuspected trading glitch and fears of a new European creditcrunch threw markets into disarray.
Market heavyweight and Europe’s largest lender HSBC was thebiggest drag on the index, trading about 4 percent lower, itssharpest fall in over two months.
HSBC shares have lost more than a tenth of their value sinceGreek debt was downgraded to “junk” by Standard & Poors in lateApril.
Europe-focused retailer Esprit Holdings, another victim of apotential sovereign debt crisis in the eurozone, was down almost6 percent.
Shares of skincare products retailer L’Occitane InternationalS.A., the first French company to list in Hong Kong, fell about 8percent on their $708 million trading debut on Friday.
L’Occitane’s debut comes at a difficult time for IPOs. OnThursday, Swire Pacific announced that it would pull the IPO ofits property unit, the latest of several IPOs to be postponed ordownsized as stock and bond markets suffer from fears of Chinesegovernment tightening measures and financial trouble in Europe
Shares of property stocks and some financials less dependanton Europe saw investor interest returning.
“It was time for bargain hunting as banks, property and evencommodities stocks have fallen substantially,” to said.
Conglomerate Swire Pacific, which pulled plans to raise up to$2.7 billion through a Hong Kong initial public offering of itsproperty unit, was up about 4.3 percent.
OVERSOLD BUT INVESTORS CAUTIOUS
The Shanghai Composite Index ended the morning session at2,720.8 points, down 0.7 percent, after falling as much as 2.7percent in early trade to its lowest intraday level since Sept.2.
The index had tumbled on Thursday in its second-biggestpercentage fall this year due in part to further signs ofweakness in the property sector.
The Shanghai index’s 14-day relative strength index was at22, well below the 30 level that indicates a market has becomeoversold. The Hang Seng entered oversold territory with themorning’s fall.
“A technical rebound was seen and short covering pulledstocks up from lows in a very cautious market,” Ben Kwong, chiefoperating officer at KGI Asia, said.
“The market was still very cautious and investors were takinga short term strategy because we are still uncertain…if itsjust the beginning of a major correction (in the United States),”Kwong said.
Banks outperformed the wider Shanghai index, with analystssaying investors may be ready to look for bargains after heftyrecent declines.
Merchants Bank, one of the morning’s 10 most actively tradedstocks, was up 0.7 percent, while Minsheng Bank pared its lossesto 0.3 percent after falling more than 2 percent earlier in thesession.
Julius Baer advised clients that the next support level forthe Shanghai Composite was expected to be 2,600.
“We still think (the European debt problems) should not haveany big effect on the economic/corporate earnings fundamentals ofthe China/Hong Kong market, even though certain market eventscould adversely affect the fund flows and investors’ sentimentsin the short term,” it said in a note.
The next expected support line for the Hang Seng was at19,400, its February lows, Julius Baer said, while maintainingits year-end target for the Hang Seng at 24,500, implying a 22percent upside potential from current levels.
(US$1=HK$7.76=6.83 yuan) (Additional reporting by Donny Kwok; Editing by JonathanHopfner))
(c) Copyright Thomson Reuters 2010. Click for Restrictions. about.reuters.com/fulllegal.asp
HK, Shanghai stocks slightly lower; HSBC falls 4 pct
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Tags: eurozone, french company, hang seng, hk debut, index trading, lows
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