GO
Loading...

Hong Kong, mainland shares down on economy, liquidity concerns

* China economy worry clouds positive H-share earnings

* Guanghui Energy is first mainland firm to issue preferred shares

* Total of 97 companies have announced listing plans this week

BEIJING, April 25 (Reuters) - Hong Kong shares fell on Friday as concerns about the state of China's economy and the health of the banking sector clouded positive earnings from several H-share listings.

Shares on the mainland fell slightly, with concerns about liquidity in the market continuing to weigh on investor sentiment after Guanghui Energy company became the first mainland company to issue preferred shares.

By midday, the Hang Seng Index was down 1.4 percent at 22,254.80 points, and was off 2.2 percent for the week. The China Enterprises Index of the top Chinese listings in Hong Kong was down 1.2 percent by the lunch break.

The CSI300 index of the largest Shanghai and Shenzhen A-share listings eased 0.2 percent. The Shanghai Composite Index was down 0.2 percent at 2,053.62 points, and had lost 2.1 percent for the week so far.

Bank of China's Hong Kong listed shares fell 1.2 percent despite the fourth largest lender posting a higher than expected rise in its first quarter net profit, ( ) as investors remained unconvinced about the overall health of the sector.

The spectre of bad debts lurking on the balance sheets of many state banks was one of two factors troubling investors, said Larry Jiang, chief strategist at Guotai Junan International in Hong Kong.

"People aren't very keen on any of the Chinese banks at the moment, because the banks reflect the overall concerns about the economy."

Anhui Conch Cement Co Ltd was similarly shunned by investors, falling 3.3 percent despite releasing Q1 earnings results on Thursday showing profit more than doubled to 2.5 billion yuan ($400.1 million).

On the mainland, shares in Guanghui Energy Co Ltd rose 4.5 percent after it became the first Chinese listed firm to announce a plan to issue preferred shares, in a surprise to market watchers who had expected banks would take the lead in testing out the new form of capital recently approved by regulators.

Investor reaction to the scheme has been mixed, with some believing that they minimise dilution of existing shareholders compared with common equity issuance.

But analysts have warned that a flood of new preferred share issues could still siphon demand from existing shares, pressuring stock prices.

"Actually, this is another way of raising funds from the market, so the news can't really support an overall rise in the market, with worries over IPO issuing, the market sentiment is poor," said Du Changchun, analyst at Northeast Securities in Shanghai.

Fears that funds may end up being diverted from existing shares are already running high in recent days after a total of 97 companies have announced plans to list on the market after a two-month hiatus.

($1 = 6.2489 yuan)

(Editing by Jacqueline Wong)