HK Shares End Higher On China IPO Hopes For Big-Cap Companies

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Dow Jones Gains in heavyweights HSBC, China Mobile and Cnooc on expectations of their mainland China listings led Hong Kong shares higher Thursday. Analysts said they expect the benchmark index to consolidate around 20,000 in near term, pending more upbeat corporate earnings to justify the recent strength. The blue-chip Hang Seng Index rose 404.47 points, or 1.97%, to 20899.24, after trading between 20,339.87 and 20,904.93 during the session. Turnover totaled HK$88.45 billion, up from HK$84.09 billion Wednesday. Among the biggest gainers Thursday were HSBC, China Mobile and oil giant Cnooc, which will likely be among the first batch of foreign-listed companies to list A shares in mainland China. HSBC closed up 3.3% at HK$85.20, its highest close since Oct. 15. China Mobile jumped 7.5% to HK$87.10, a level unseen since Sept. 2, and Cnooc rose 3.6% to HK$11.00. HSBC Holdings has mandated China International Capital Corp. and Citic Securities as bookrunners on its planned US$3 billion-US$5 billion Shanghai initial public offering, people familiar with the situation said. Overnight strength in U.S.-listed banks also supported HSBC, some analysts said. Bank of America rose 6.5% to US$16.66, Wells Fargo was up 5.7% at US$28.02, and American Express closed up 5.8% at US$$30.36. However, some analysts said gains in HSBC and China Mobile suggest nothing more than a potential correction. "We can't rule out the possibility that some players are purposely propping up the two stocks to create a smokescreen effect that the market is strong, while they sell other shares," Kingston Lin, business development manager at OSK Securities. Market participants said the recent strength in Hong Kong stocks was running too far ahead of economic fundamentals, and a consolidation is unavoidable in the near term. "The market is largely driven by the liquidity as a result of the money-printing policies by central banks," DBS Vickers Securities director Peter Lai said. "I think we're still far from moving out of recession, and there's a lot of uncertainties in the U.S. economy." Lai said mainland property developers and commodities companies that have accumulated the biggest gains may potentially have the steepest losses. Hong Kong property developers were mixed Thursday. Henderson Land dropped 0.1% to HK$50.65, Hang Lung Properties fell 0.2% to HK$26.55, while Cheung Kong rose 2.2% to HK$99.00 and Sun Hung Kai Properties was 0.4% higher at HK$114.20. Swire Pacific gained 1.23% to HK$86.20 after posting a 17.6% increase in its first-half underlying net profit, which beat analysts' forecast. Credit Suisse upgraded the net asset value estimates for property companies by 13%-49% after revising the outlook for commercial properties and raising the property price estimates for 2009. "While we believe the upside for property stocks (due to further strengthening in the residential sector) has probably been discounted, the next driver for these stocks will likely be commercial properties, especially the office sector, which saw an improvement in take-up rates, with office rents expected to start rising towards the end of the year." Local bourse operator Hong Kong Exchanges & Clearing was 2.6% higher at HK$147.60 on strong turnover. -By Jackie Cheung, Dow Jones Newswires; 852-2802-7002; jackie.cheung@dowjones.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it Comments Please login to post comments or replies.