HK stocks fall as China Mobile drags; Shanghai slips

Trade the News

Wednesday September 08, 2010 05:03:05 AM GMT

* Hong Kong shares drop 1.4 percent; Shanghai drops 0.5 pct

* China Mobile slumps 3.9 percent after Vodafone sells stake

* Shanghai Composite Index fails to breach 2,700 level

* Steel issues pull back as investors pocket post-rally gains (Updates to close)

By Vikram S Subhedar and Farah Master

HONG KONG/SHANGHAI, Sept 8 (Reuters) - Hong Kong stocks snapped a five-day gaining streak on Wednesday morning, tracking a drop on Wall Street on Tuesday, with China Mobile slumping after news of Vodafone selling down its stake in the company.

The benchmark Hang Seng Index was down 1.43 percent at the midday trading break, pulling away from a one-month high to 21,095.91. The China Enterprises Index fell 1.58 percent to 11,767.29.

The index had rallied more than 4 percent since last Tuesday after last's week's better-than-expected manufacturing data from major economies and United States payrolls data on Friday eased some worries about the global outlook.

The Hang Seng Index shed about a third of those gains on Wednesday morning, with China Mobile Ltd the biggest drag on the index, slumping 3.9 percent and pulling other telecommunications counters lower.

"News of such a big placement is going to affect appetites for the entire sector and telecom shares have had a very good run this year, so some profit-taking is reasonable," said Jackson Wong, a vice-president at Tanrich Securities in Hong Kong.

China Mobile fell after Vodafone Group Plc sold its 3.2 percent stake in China's largest mobile carrier for $6.5 billion.

Vodafone, the world's largest telecommunications operator by revenue, sold 642.9 million China Mobile shares at a 3.4 percent discount to the stock's last close of HK$82 on Tuesday.

Rival China Unicom dropped 4.3 percent.

The sub-index of telecommunications companies is up nearly 10 percent this year compared with a 3.5 percent decline for the broader Hang Seng Index, partly due to investors shifting funds into defensive sectors.

SHANGHAI SLIPS

China's key stock index was down 0.47 percent by midday on Wednesday, stumbling at a key resistance level again, as weak overseas markets prompted a mild selloff.

The Shanghai Composite Index was at 2,685.562, after barely reaching a new four-month closing high on Tuesday.

Analysts said the 2,700 mark, which the index has repeatedly failed to breach, continued to act as a strong resistance level.

"The market needs a strong signal to break past and stay above 2,700 points. Only certain sectors are outperforming, it's not a general market trend," said Guo Yanling, analyst at Shanghai.

Financials slumped with China Merchants Bank Co Ltd down 2.1 percent and China Minsheng Banking Corp down 1.8 percent.

Industrial and Commercial Bank of China Ltd dropped 1 percent after the world's biggest bank by market value said it would list on Friday the 25 billion yuan in convertible bonds it issued last week.

"After demand for small caps ebbed, investors are still not buying large caps. Worries about the economy and property measures are offsetting good earnings," said Guo.

Property counters fell after the 21st Century Business Herald cited analysts as saying the government may launch a second round of measures to cool the market.

Shanghai's sub property index fell 1.7 percent, underperforming the broader market. Shandong-based Lushang Property Co Ltd fell 3.3 percent, while Shanghai Xinmei Real Estate Co Ltd fell 3 percent.

Steel plays were lower, with investors taking profit after a two-day rally. Guangzhou Iron and Steel Co Ltd, one of the biggest losers on the Shanghai exchange, fell 3.2 percent. (Editing by Chris Lewis)

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