HONG KONG (Reuters) - Hong Kong shares rose on Friday, led by a 3.4 percent gain in PetroChina after the oil giant posted a quarterly profit that trumped estimates late on Thursday, with a brighter outlook projected for it compared with sector peers.
Mainland Chinese markets were slightly weaker at the midday trading break, with the CSI300 Index down 0.1 percent and the Shanghai Composite Index down 0.2 percent in the lowest midday A-share turnover on the Shanghai bourse this week.
China Petroleum & Chemical Corp (Sinopec) lost 1 percent after posting a worse-than-expected 35 percent slump in quarterly earnings. It gained 0.7 percent in Hong Kong on expectations for an improved outlook.
Hong Kong's Hang Seng Index rose 0.5 percent, while the China Enterprises Index of top mainland listings in Hong Kong was up 0.6 percent, with turnover at lacklustre levels, consistent with the past few sessions.
The HSI, down 0.5 percent this week, and the HSCE, down 0.7 percent, are both poised to snap a three-week winning streak.
The Shanghai Composite Index is down 0.3 percent this week, but the CSI300 is holding on to a 0.1 percent gain. Those slim gains could evaporate in the afternoon if losses accelerate ahead of a two-day public holiday at the start of the next week in mainland China. Hong Kong markets are closed on Tuesday.
A majority of Chinese companies, reporting quarterly earnings this week, have missed expectations and trends within sectors have been spotty, with fund managers saying stock picking could prove tougher.
"Even if you are bullish about China, you probably shouldn't just go with cyclicals anymore. With the economy moving into a transition phase, you are likely to pick China winners if you play the structural story," said Tan Eng Teck, a Singapore-based investment manager at Treasury Asia Asset Management.
PetroChina Co Ltd appeared poised for its best daily performance in Hong Kong since January 3, extending gains this year to almost 21 percent. This compares with 13 and 11 percent gains for the Hang Seng and China Enterprises indexes, respectively.
PetroChina is trading at a 6 percent premium to its historical median 12-month forward earnings multiple, according to Thomson Reuters StarMine. By contrast, Sinopec is trading at a 17 percent discount and CNOOC Ltd a 22 percent discount to their respective historic medians.
Although PetroChina is seen as having the best long-term growth prospects among the three Chinese oil majors, the difference is not stark, suggesting the relatively steeper valuation for PetroChina could limit further gains.
EARNINGS DRIVE MAJOR STOCK MOVES
Bank of China Ltd slipped 1.2 percent in Hong Kong after posting quarterly earnings late on Thursday that underwhelmed expectations and set a muted tone for its three peers that report on Friday.
Air China Ltd advanced 7 percent in Hong Kong and 3.5 percent in Shanghai. Citi analysts upgraded its Hong Kong listing from "sell" to "buy" on Friday, suggesting the worst may be over for the airline after it posted an 85.7 percent plunge in quarterly profit on Thursday.
The airline also announced on Friday that it would issue 1.05 billion yuan worth of new A shares to its controlling shareholder, raising money to reduce bank borrowings and for working capital.
Foxconn International Holdings Ltd, an Apple Inc supplier, fell as much as 13 percent on Friday to a six-month low after the world's biggest contract maker of cell phones warned that weaker demand from some key customers would widen its first-half loss.
The company, which assembles handsets for the likes of Nokia and Motorola Mobility Holdings Inc, has been grappling with rising costs and falling prices in the cut-throat market.
In a contrasting tale of two listing debuts, Haitong Securities Co Ltd, China's second-biggest broker by assets, was little changed in its Hong Kong debut on Friday. . China's People.cn Co Ltd leapt more than 75 percent on the first day of trading in Shanghai, as investors flocked to the state-backed news portal, giving it a bigger market capitalisation than New York Times Co.
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