Hong Kong shares up, China down

Hong Kong shares closed stronger on Thursday, supported by steady gains in oil and banking counters ahead of a slew of earnings announcements lasting well into next week. The benchmark Hang Seng Index closed up 0.39 percent to 22,915.28, while the China Enterprise Index climbed 0.62 percent on the day.
China's benchmark index, the Shanghai Composite ended down 0.1 percent at 2,946.7 points, with profit-taking in property counters offset by a strong showing from oil companies. CNOOC Ltd , China's top offshore oil producer, gained 1.84 percent in Hong Kong after posting late on Wednesday its best-ever fourth-quarter profit, beating analysts' forecasts.
The four major Chinese banks, China Construction Bank Corp, Agricultural Bank of China Ltd, Industrial and Commercial Bank of China Ltd and Bank of China Ltd, all traded higher ahead of Bank of China's earnings announcement expected later on Thursday.
After the closing bell, the Hong Kong subsidiary of Bank of China reported 2010 net profit of HK$16.2 billion, beating market expectations for HK$15.25 billion. Barclays Capital said it expected Chinese banks to achieve a 35 percent net profit growth on average.
Key earnings in focus on Friday include those from China Construction Bank, China Petroleum & Chemical Corporation, China Resources Land Ltd, China Shenhua Energy Co Ltd and Yanzhou Coal Mining Co Ltd.
Chinese cement producers surged Thursday. Anhui Conch Cement Co Ltd, up 5.38 percent, hit an all-time high and China National Building Material Co Ltd was up 2.3 percent. According to Thomson Reuters Starmine, CNBM still trades at a 5 percent discount to its median forward 12-month earnings multiple. Anhui Conch trades at a 6 percent premium.
As China's plans to ramp up affordable housing supports higher cement prices, analysts could raise their earnings forecasts for cement producers keeping valuations attractive.
Investors nervous about instability in the Middle East pushed up shares of China's largest oil company PetroChina Co Ltd by 1.2 percent. The oil company also announced that its first liquid natural gas terminal was slated to receive its initial cargo in April. Trading in Shanghai will stay in the relatively narrow range between 2900-3000 without an external push, said Xu. "At 3,000, investors are not confident, so people are standing on the sidelines and watching," he said.
The property sub-index ended down 0.5 percent in mild profit-taking after gaining 2.7 percent on Wednesday as the central government said it would reduce purchase and rental fees for affordable housing from May 1.
But China property stocks were the cheapest mid-cap sector and remained the top sector pick in 2011, BNP Paribas Securities analyst Erwin Sanft wrote in a research note. The financial sub-index eased 0.4 percent in light volume before earnings announcements for large-cap lenders start later on Thursday with Bank of China Ltd, which gained 0.3 percent.
"Bank earnings are expected to be very good, so share prices are not going to fall significantly," said China Development Bank Securities analyst Chen Shaodan in Beijing. The HSBC flash manufacturing purchasing managers' index showed that Chinese factories increased production this month, while their price increases slowed, pointing to easing inflationary pressure.
"Despite small signs of easing, larger inflationary pressures still exist and pose a risk to banks. The market will move in a small range for a while as this kind of trend is very difficult to change," Chen said.