Hong Kong and China shares finished higher on Monday amid lingering caution over Libya and easing concerns on Japan's nuclear situation, as investors largely shrugged off Beijing's latest tightening move. The benchmark Hang Seng Index finished up 1.73 percent at 22,685.22, breaching its 200-day moving average for the first time in three days, while the China Enterprises Index climbed 1.75 percent.
The Shanghai Composite Index ended 0.1 percent higher at 2,909.1 points, after closing up 0.3 percent on Friday. The financial sub-index was up 0.4 percent after the People's Bank of China on Friday night announced a 50 basis point reserve requirement rise that will freeze up an estimated 360 billion yuan ($55 billion) when it takes effect on March 25.
"A lot of market participants had been expecting an RRR increase, so today's market reaction wasn't that big," said Xiangcai Securities analyst Cheng Yi in Shanghai. Although China's benchmark short-term money market rate jumped nearly 100 basis points on Monday after the announcement, financial stocks had largely already priced in liquidity tightening, said analysts.
With Japan markets closed for a holiday on Monday, coming 2010 earnings announcements, rather than the latest tightening move by the Chinese central bank, were seen as a factor behind tepid price movements among Chinese banks in Monday morning trade. While most expect banks to meet 2010 earnings expectations, the outlook for 2011 is less favourable with the central bank expected to further dampen inflation with more tightening measures this year. China's top lender, Industrial and Commercial Bank Of China Ltd's Shanghai-listed A-shares gained 1.9 percent, while its Hong Kong-listed H-shares rose 1.68 percent. Bank Of China Ltd , which is expected to announce its 2010 results on Friday, edged up 0.5 percent.
The Shanghai market will likely remain near 3,000 points with support from the 125-day moving average - currently at 2,859 points - in the absence of a bigger external push, said Cheng. China energy stocks largely benefited as Brent climbed more than 1 percent on Monday towards $116 after Western forces launched a military campaign against Libya, stoking fears that violence will intensify in North Africa and the Middle East, source of more than a third of the world's oil.
Boosted by a record quarterly profit announced last week, China's biggest listed company by market value, PetroChina Co Ltd's A-shares , ended up 1.6 percent. Its Hong Kong-listed H-shares surged 3.29 percent on the day. CNOOC Ltd gained 3.6 percent but China Resources Power Hldg Co Ltd lost a further 1.44 percent on Monday. Last week, during which the company announced 2010 results, the stock dropped 7.8 percent last week.
Foxconn International Holdings Ltd led gains, up 5.24 percent on what analysts said was speculative buying ahead of its earnings announcement on March 30. A 12 percent slide last week made Foxconn technically oversold, with its relative strength index (RSI) hitting the lowest-ever level of 9.9 last Friday. A reading below 30 suggests a stock is oversold. "It doesn't matter if the earnings are expected to be good or bad, investors are simply looking for reasons to trade," said KSI Asia Chief Operating Officer Ben Kwong.
Key earnings in focus on Tuesday include China Coal Energy Co Ltd, China Life Insurance Co Ltd, the largest insurer in the country by market capitalisation and PCCW Ltd. PCCW, chaired by media tycoon Richard Li and expected to announce its 2010 earnings on Tuesday, climbed more than 4.57 percent on news the company is studying a plan to spin off its telecommunications operations to form Hong Kong's first listed business trust. PCCW has been struggling to maintain margins in a highly competitive market.