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HK shares end up 1 pct in stagnant turnover

Reuters - Saturday, July 5

By Parvathy Ullatil

HONG KONG, July 4 - Hong Kong shares closed up 1 percent on Friday on the back of strong gains in Chinese financials after a positive earnings report from the country's biggest bank, but turnover dropped to its second-lowest level this year.

Bank shares rallied after Industrial & Commercial Bank of China <1398.HK>, the world's largest lender by market capitalisation, said on Thursday its first half profit grew at least 50 percent, based on Chinese accounting standards. [ID:nHKG350323]

ICBC rose 2 percent, while smaller rival China Construction Bank <0939.HK> was 1.4 percent higher and Bank of Communications <3328.HK> gained 1.1 percent. Merchants Bank <3968.HK>, the nation's sixth-largest lender, rose 2 percent.

Coal stocks tumbled, with Yanzhou Coal <1171.HK> dropping 4.7 percent on talk of a possible tax adjustment to the commodity. But some analysts dismissed the speculation as it didn't appear to fit China's ongoing battle against rising inflation, and attributed losses to institutional selling.

The Hang Seng Index <.HSI> closed up 181.04 points at 21,423.82 after losing nearly 4 percent in the past two days. The index lost 2.8 percent over the week.

It was one of the only markets to close in positive territory on a generally grim day for nearby bourses, with Taiwan's main exchange <.TWII> dropping over 2 percent and South Korea's KOSPI index <.KS11> shedding 1.8 percent.

"Investors were reluctant to get into the market ahead of the holiday weekend in the U.S. and the release of a slew of key indicators, including consumer credit and pending home sales data next week," said Castor Pang, strategist with Sun Hung Kai Financial.

U.S. markets are closed for Independence Day on Friday.

Analysts expect the HSI to breach the 21,000 support level next week if the U.S economic data is unfavourable.

Mainboard turnover fell to a thin HK$50.2 billion ($6.4 billion) from HK$75.81 billion on Thursday, its second lowest level this year since June 17, when just HK$48.3 billion worth of stock was traded in a single day.

China Mobile <0941.HK> led gainers with a 2 percent rally, after hitting a 16-week low on Thursday.

HSBC Holdings <0005.HK>, Europe's largest bank and the most heavily weighted stock on the Hang Seng, gained 0.9 percent after the European Central Bank dimmed prospects for further rate moves after Thursday's rate hike. [ID:nL0323441]

The China Enterprises Index <.HSCE> of top locally listed Chinese firms rose 0.8 percent.

Ping An Insurance <2318.HK> <601318.SS> clawed back 3.8 percent after dropping nearly 16 percent in the past two sessions amid speculation the firm faced problems related to a tax audit. The company has denied the speculation. [ID:nSHA343105]

Oil stocks Sinopec Corp <0386.HK> and CNOOC <0883.HK> moved in opposing directions on surging crude oil prices.

Asia's largest refiner, Sinopec, jumped 2.8 percent after closing at its lowest level in two and half months on Thursday.

An offshore oil producer and major beneficiary of runaway oil prices, CNOOC dropped 1.8 percent, giving up recent gains.

Chinese property firm Agile Property <3383.HK> soared 16.1 percent on Friday after the company said it would join forces with investment bank Morgan Stanley to develop a $2.9 billion holiday resort project in China's Hainan province. [ID:nHKG352404]

Shares in China Shanshui Cement Group <0691.HK>, the country's second-largest clinker and cement producer, rose 7 percent on their debut on Friday after the firm raised $234 million in a Hong Kong initial public offering. [ID:nT245895]

Local film and TV company Shaw Brothers <0080.HK> rallied 5.8 ent after a newspaper reported a syndicated loan supporting Country Garden <2007.HK> chief Yeung Kwok-Keung's takeover of the company would be signed in a couple of days.

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