Hong Kong shares higher in technical bounce; gold stocks outperform

Share prices were higher midmorning in a technical rebound after falls over the last two sessions, with gold counters outperforming due to continued strength in prices of the precious metal.

Dealers said the market's gains are being capped due to cautious ahead of key US jobs data and following steep losses on the Tokyo bourse.

Oil prices are also weighing on sentiment, with crude futures hitting a new trading high above 100 usd a barrel overnight before edging lower.

China Eastern Airlines (CEA) turned higher after early weakness, with investors hoping that the carrier will receive a better offer for the 24 pct stake it had proposed to sell to Singapore Airlines (SIA) and Temasek Holdings.

Air China's parent China National Aviation Corp (CNAC), which holds 12 pct stake in CEA, confirmed that it will reject a proposed 3.80 hkd a share purchase deal of the two Singaporean entities in CEA unless the offer is improved.

CNAC also said it will put forward its own proposal if the Singapore firms' deal is not approved at a special meeting of CEA shareholders on Tuesday.

At 11:09 am, the Hang Seng index was up 259.88 points or 0.97 pct at 27,147.16, off a low of 26,994.85 and high of 27,224.99.

Turnover was 28.18 bln hkd.

"Despite opening gains, investor sentiment is generally weak because of talk of stagflation and recession in the US and as crude oil prices continue their uptrend," said Winner Lee, associate director at BNP Paribas.

"With continuing worries over rising inflation all over the world as a result of high oil prices and uncertainties over the state of the US economy, I won't be surprised if the market weakens later in the day," she said.

She noted that investors will watch upcoming US data closely for more clues on the direction of the US economy.

The US Labor Department will release tonight December non-farm payrolls data, which would provide a gauge for consumer spending prospects.

"Our house view on the US economy is that it might post negative growth in the first quarter this year, but it would recover in the third and fourth quarters," Lee said.

"At the moment, global markets do not have clear direction and this has made many investors cautious," she added.

She noted, though, that local property stocks are attracting interest following recent correction.

"The outlook and fundamentals of the local housing market are positive, especially because of negative real interest rates here which make investments in properties more attractive than putting excess monies in bank deposits," she said.

"The recent correction in the sector is now seen as a buying opportunity for scores of investors," Lee added.

Among large-caps, China Mobile rose 1.50 hkd or 1.13 pct at 134.20, HSBC gained 0.10 hkd or 0.08 pct at 129.60, HKEx was flat 213.60 hkd and Hutchison Whampoa was 0.60 hkd or 0.68 pct higher at 89.40.

Properties were firmer, with the sectoral sub-index gaining 133.99 points or 0.36 pct at 37,182.98.

Cheung Kong rose 0.10 hkd or 0.07 pct at 142.10, Henderson Land gained 0.95 hkd or 1.32 pct at 73.10, Sun Hung Kai was up 0.60 hkd or 0.37 pct at 162 and Sino Land was up 0.25 hkd or 0.93 pct at 27.05.

China financials traded mixed, with China Construction Bank losing 0.01 hkd or 0.16 pct at 6.13, ICBC up 0.07 hkd or 1.34 pct at 5.29, Bank of China flat at 3.66 hkd, China Life up 0.15 hkd or 0.39 pct at 38.70 and Bank of Communications down 0.04 hkd or 0.39 pct at 10.18.

CEA turned higher, gaining 0.23 hkd or 3.21 pct at 7.34 on hopes that it might receive an improved offer for the stake that it is selling to Singapore Airlines and Temasek Holdings.

Air China's parent CNAC said it will reject the proposed investment of Singapore Airlines and Temasek Holdings in CEA unless the offer is improved.

It said it will put forward its own proposal if the Singapore firms' deal is not approved at a CEA shareholders meeting on Tuesday.

A media report said yesterday that CNAC plans to launch a bid of around 5 hkd a share for the 24 pct stake in CEA that SIA and Temasek have offered to buy at 3.80 hkd a share.

"I believe that CNAC is serious when it spoke of presenting its own proposal for a stake purchase in CEA," said Francis Lun, general manager at Fulbright Securities.

"Its actions will certainly put a lot of pressure on SIA and Temasek to raise their purchase price offer. If they don't, I don't rule out the possibility of CNAC bringing in Air China and Cathay Pacific to make a rival bid for a CEA stake purchase," he said.

Air China rose 0.16 hkd or 1.5 pct at 10.80.

Other airlines traded mixed, with Cathay Pacific up 0.20 hkd or 1.02 pct at 19.88 and China Southern Airlines down 0.26 hkd or 2.49 pct at 9.81.

Oil stocks were higher on high crude prices, with PetroChina rising 0.26 hkd or 1.97 pct to 13.44, CNOOC up 0.40 hkd or 3.2 pct at 13.54 and Sinopec up 0.26 hkd or 2.34 pct at 11.36.

Gold miners posted sharp gains as the precious metal benefits from its appeal as a safe-haven investment amid a spike in oil prices and weakness in the US dollar.

Lingbao Gold surged 0.56 hkd or 11.24 pct at 5.54 and Zijin Mining was up 0.54 hkd or 4.31 pct at 13.08.

Other resources counters also gained, with Hunan Nonferrous rising 0.06 hkd or 1.21 pct to 5.03, Jiangxi Copper up 0.84 hkd or 4.59 pct at 19.16, Chalco was up 0.36 hkd or 2.42 pct at 15.24 and China Coal up 0.05 hkd or 0.22 pct at 23.25.

Elsewhere, China Communications Construction rose 0.30 hkd or 1.37 pct at 22.15, China Unicom was flat at 16.48 hkd and Agile Property down 0.40 hkd or 3.07 pct at 12.62.

The Hang Seng China Enterprises index was up 182.30 points or 1.18 pct at 15,646.96.

(1 usd = 7.8 hkd)