Hong Kong stocks ended lower on Tuesday as selling triggered by disappointing HSBC Holdings (0005.HK) earnings dominated trading, while stocks in China eased as investors took profit on small caps after a recent rally.

HSBC fell 7.3 percent, its biggest single-day loss in three months, to a more than two-week low of HK$80.35, before ending at HK$80.55, down 7.04 percent.

Europe’s biggest bank missed expectations for its 2009 earnings on rising bad debt. HSBC posted a net profit of $7.1 billion compared with $9.3 billion in 2008, and short of $11.4 billion forecast in a Thomson Reuters I/B/E/S poll. [ID:nLDE6200IU].

“It used to be a firm market, but index heavyweight HSBC weighed down the entire market,” said Alfred Chan, chief dealer at Cheer Pearl Investment. “The market’s next move will depend on whether HSBC can hold above the HK$80 level.”

Hang Seng Bank (0011.HK), a unit of HSBC, fell as much as 5.6 percent to a three-week low after the bank declared a lower dividend following a 6.2 percent drop in 2009 profit to HK$13.22 billion, against a consensus forecast of HK$13.29 billion. [ID:nHKF002169]. The bank ended down 5.13 percent.

The benchmark Hang Seng Index .HSI closed down 0.72 percent or 150.82 points at 20,906.11. The China Enterprises Index .HSCE of top locally listed mainland Chinese stocks closed up 0.87 percent at 12,017.55, the highest close in about six weeks.

Turnover rose to HK$72.10 billion ($9.3 billion) from Monday’s HK$67.97 billion.

Investors switched to Chinese banking shares to avoid the underlying risk of exposure to the U.S. and European markets, brokers said.

Hopes that China’s loose monetary policy would remain in place and more attractive valuations among Chinese banks saw China Construction Bank (0939.HK), the country’s second-largest bank by assets, end up 1.15 percent, and top lender ICBC (1398.HK) finish up 1.56 percent, their highest closes in five weeks.

China Merchants Bank (3968.HK) rose as much as 5.1 percent to HK$20.80, its highest since Jan. 8, before ending at HK$20.30, up 2.53 percent. The country’s sixth-largest bank said it would launch a long-awaited rights share issue in Shanghai and Hong Kong this week to raise $3.2 billion. Analysts said the generously priced issue would be well-received by the market. [ID:nTOE6200AI]

Chinese battery maker BYD (1211.HK) rose 4.44 percent to HK$65.90 after saying it would team up with Daimler (DAIGn.DE) to develop electric cars for the Chinese market. [ID:nLDE6202C2]

SHANGHAI EASES AS SMALL-CAP DOWN

China’s key stock index closed down 0.48 percent on Tuesday after investors took profit in small-cap shares in the wake of a speculative rally over the past week.

The Shanghai Composite Index .SSEC ended at 3,073.108 points, easing from its highest close in five weeks on Monday after a nearly week-long 5 percent rally driven by bargain-hunting.

Investor confidence remains fragile partly because the China Securities Regulatory Commission has been adding a large number of new shares into the market to cool trading.

On Monday, the regulator announced it had approved initial public share offerings by two small companies and would review applications from four others on Friday.

“With new shares coming into the market at such a quick pace, liquidity has become a problem,” said Huatai Securities analyst Li Wenhui in Nanjing. “Investors can only focus on a few sectors, without enough funds to push up the overall market.”

Li and several other analysts and traders said they expected the benchmark index to move narrowly around the 125-day moving average, now at 3,078 points, for the rest of this week. The average is regarded as a barometer of bearish versus bullish sentiment in the market.

Small-cap China Sports (600158.SS) was Tuesday’s biggest faller, retreating 6.27 percent to 11.95 yuan after climbing 18 percent last week despite a lack of news about the company.

Other small caps, including money-losing companies, attracted speculative trade as an official clampdown on excessive bank lending this year cut funds flowing into the market and weakened the ability of investors to trade index heavyweights, traders said.

Shenzhen Desay Battery Technology 000049.SZ and Bgrimm Magnetic Materials and Technology (600980.SS) were among the day’s top five gainers, both jumping by their 10 percent daily limit.

Losing Shanghai stocks outnumbered gainers by 541 to 334, while turnover fell to a moderate 124 billion yuan ($18 billion) from Monday’s 131 billion yuan.

The market is also awaiting policy signals from an annual meeting of the National People’s Congress, China’s parliament, which begins this week.

“The market is watching for new policy indications from the annual parliamentary session,” said a senior Chinese trader in Shanghai.

China Merchants Bank (600036.SS) was one of the day’s most actively traded stocks, up 0.98 percent at 16.46 yuan after it priced its previously announced A- and H-share rights issue worth 22 billion yuan at a generously low price of only 8.85 yuan.

China Vanke (000002.SZ) closed up 1.80 percent at 9.61 yuan after it beat forecasts with a rise in fourth-quarter net profit of around one-third and forecast strong sales growth this year.

Posted by Shayne Heffernan on Mar 2nd, 2010and filed underBRIC, Latest News.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site