Hong Kong shares hover at 2012 highs, China slips

Clement Tan

(Updates to midday)

* HSI flat, H-shares -0.4 pct, CSI300 -0.2 pct

* Profit taking seen in recent outperformers HKEx, HK property

* CNOOC up 1.4 pct after positive Q3 earnings

* Citic Bank slides 3.2 pct after proposed $235 million stake sale

HONG KONG, Oct 25 (Reuters) - Hong Kong shares were flat at midday on Thursday to stand on the brink of snapping a nine-day winning streak that has taken the Hang Seng Index to highs for 2012, as investors took profits and third-quarter corporate earnings drove bigger price movements.

The Hang Seng Index was almost unchanged at the midday trading break, hovering at a 2012 closing high recorded on Wednesday. The benchmark is now up almost 14 percent from a Sept. 5 low and 18 percent since the beginning of the year.

Its 14-day relative strength index (RSI) hovered at two-year highs on Friday after hitting 78.1 on Thursday, its highest since Oct 15, 2010. A reading above 70 could suggest the benchmark is overbought, while a reading below 30 could indicate the market is oversold.

In the mainland, the Shanghai Composite Index and the CSI300 Index of the top Shanghai and Shenzhen listings each slipped 0.2 percent. The China Enterprises Index of the top Chinese listings in Hong Kong lost 0.4 percent.

``You have to realize we are now in the fourth quarter, so hedge fund managers will now be looking to lock in some profits after the rally from early September,'' Hong Hao, chief equity strategist at Bank of Communication (BoCom) International Securities, told Reuters.

``Institutional investors are still very hesitant, and without them, it's going to be difficult to see the rally carrying on from here,'' Hong said, adding a positive set of Chinese economic data for October would help.

Hong Kong developers trimmed this week's strong gains on expectations that capital inflows into the city could buoy property prices. Cheung Kong Holdings shed 0.8 percent, while Henderson Land lost 0.7 percent.

Shares of bourse operator Hong Kong Exchange slipped 0.5 percent from a six month closing high. It is still up 9.6 percent this month after surging 13.8 percent in September.

China's second-largest mobile operator, China Unicom slipped 1.9 percent ahead of its third-quarter earnings expected later in the day. It is up 4.2 percent this month, but is still down almost 19 percent on the year.

Despite that, China Unicom is still trading at a 28 percent premium over its 12-month forward earnings multiple and a 9 percent premium over its 12-month forward price-to-book value, according to Thomson Reuters StarMine.

Over the last 30 days, three of 31 analysts have shaved their 2012 full year earnings-per-share estimate for China Unicom by an average of 19.3 percent, according to StarMine.


In a mixed day for the Chinese banking sector, Bank of China (BOC) rose 0.6 percent ahead of its third-quarter earnings expected after market close on Thursday. It is up 6.4 percent this month and almost 10 percent this year.

BOC is currently trading at a 46 percent discount to its 12-month forward price-to-book value, according to Thomson Reuters StarMine.

Five of 36 analysts have raised their 2012 full year earnings-per-share estimates for BOC by an average of 4 percent in the past 30 days, according to StarMine.

Smaller sector rival Citic Bank slumped 3.2 percent to HK$4.00, at the low end of the price range of a $235 million stake sale, that was offered at a discount of up to 3.15 percent from its Wednesday close. ID:nH9E8KP01Q 3/8

Chinese oil major CNOOC Ltd rose 1.4 percent after posting an encouraging 4.7 percent increase in third quarter unaudited oil and gas sales revenue, which were largely in line with market expectations.

The company also said it was working to win regulatory approval from Canada this year for its $15.1 billion bid for energy producer Nexen .

In a report on Thursday, CICC analysts raised their target price for CNOOC from HK$17 to HK$18, saying they expect to see improved output from China's top offshore oil and gas producer.

(Editing by Simon Cameron-Moore)