HK, China shares slide, risk aversion magnifies losses

Hong Kong shares had edged lower by midday on Monday, giving up earlier gains, as investors sold shares of companies that reported weak or even forecast-meeting half-year results, underscoring weak risk appetite, with more volatility expected.

The European debt and banking crisis, and growing fears of the United States dipping into another recession have triggered a global selloff that has left Hong Kong shares in their biggest three-week decline since January 2009.

A lot of it has got to do with the prevailing bearish market sentiment, said Lee Wee-Liat, regional head of property at Samsung Securities. A bigger concern is a slowdown in China's economy. We haven't reached that stage yet, but the equity market could be pricing that in, just in case.

The benchmark Hang Seng Index was down 0.93 percent at 19,219.65 points at the midday trading break, in low turnover. The China Enterprises Index was down 1.37 percent.

Illustrating the extent of risk aversion, China Construction Bank Corp , the world's No.2 bank by market capitalisation, was the top drag, down 2.3 percent despite reporting a 31 percent rise in first-half earnings, helped by strong growth in financial advisory services.

China Resources Land Ltd was the top percentage loser on the benchmark, plunging 13.6 percent to its lowest since April 2009. It said first-half revenue and core net profit that were down nearly 40 and 16 percent, respectively year-on-year, Lee said in a research note on Monday.

While attributing underwhelming earnings to construction cycles, seen more difficult to control on a half-yearly basis, Lee also attributed the steep loss to the company's plan to issue new shares and pay cash to buy property projects from its parent for HK$7 billion ($897.8 million).

Yanzhou Coal Mining Co Ltd dropped 10.4 percent after reporting weaker-than-expected first-half earnings. HSBC downgrading the stock to neutral from overweight, cutting its 2011 earnings-per-share forecast by 15 percent.

CYLICALS LEAD SHANGHAI LOWER

The Shanghai Composite Index declined 0.49 percent to 2,521.9 points, led by banks and energy counters as midday A-share turnover declined from Friday to near August lows.

Industrial and Commercial Bank of China Ltd (ICBC) and Bank of China Ltd were among the top drags, down 0.7 percent each. Coal giant China Shenhua Energy Co Ltd lost 1.8 percent.

Cement issues, outperformers this year, extended losses after mainland media reports on Friday said cement prices in eastern China unexpectedly slipped in July.

Anhui Conch Cement Co Ltd lost 3.3 percent in Shanghai, plunging to a six-month low. Its Hong Kong shares 10.6 percent to the most oversold level on the charts since May last year.