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HK, China shares post slim gains ahead of bank earnings

Published 04/27/2011, 01:24 AM
Updated 04/27/2011, 01:28 AM
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* Hang Seng Index up 0.4 pct, off session high

* Shanghai Composite up 0.2 pct, banks edge higher

* Coal plays power ahead after Yanzhou Q1 profit up 18 pct

* Unicom, China Life down as investors shun weak earnings (Updates to midday)

By Vikram Subhedar and Yixin Chen

HONG KONG, April 27(Reuters) - Shares in Hong Kong edged upwards on Wednesday, with financials receiving a lift in anticipation of strong earnings from Chinese banks while property stocks, underperformers this month, saw bargain-hunting ahead of a land auction.

Investors shunned companies that posted disappointing first-quarter results. China Unicom (Hong Kong) Ltd <0762.HK and China Life Insurance Co Ltd were the biggest drags on the benchmark index.

The Hang Seng Index was up 0.41 percent at 24,105.07 in light trading by the midday break, with year's high of 24,468.6 hit earlier this month as strong near-term resistance.

One trigger lifting the market towards that level could be first-quarter earnings from China's banks, often considered a proxy for the economy, which are expected to show robust profits despite government efforts to tighten lending. [ID:nL3E7FO09Q]

May Yan, Asia ex-Japan banks analyst at Barclays Capital, said in a note that net interest margins, a key performance criteria for banks, were likely to expand quarter-on-quarter and drive strong results.

Larger banks such as Agricultural Bank of China Ltd , scheduled to report its results after the market closes, which have low funding costs, were likely to see greater benefits, said Yan.

AgBank's Hong Kong-listed shares are up 23.3 percent this year compared with the Hang Seng Index's 4.6 percent rise.

Investors have shown little tolerance for weak results, with China Unicom down 2.4 percent after reporting a weaker-than-expected first quarter as escalating marketing and subsidy costs ate into margins. [ID:nL3E7FQ1B3]

SHANGHAI STEADY AS CEMENT, COAL RISE

China's main stock index was up 0.2 percent, rebounding from a four-week low and led by banks, although thin volumes kept analysts wary.

The benchmark Shanghai Composite Index was at 2,945.8 points, after falling 0.9 percent on Tuesday -- the lowest level in four weeks.

"Banks are performing quite well today, lifting the index," said Zhang Yanbin, analyst at Zheshang Securities in Shanghai. "But we don't think the rebound will continue as volume is thin."

Industrial & Commercial Bank of China Ltd was up 0.7 percent and the biggest boost to the benchmark. Bank of China Ltd was up 0.9 percent.

Cement companies also outperformed on Wednesday, with investors upbeat over a rise in cement prices. Jiangxi Wannianqing Cement Co Ltd rose 3.6 percent and Huaxin Cement Co Ltd gained 2.9 percent.

Coal issues rose as encouraging numbers from Yanzhou Coal Mining Co Ltd , up 1.5 percent, lifted the sector. (Created by Vikram Subhedar; Editing by Chris Lewis)

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