Mao Zhongwu (right), chairman of Sany Heavy Equipment International Holdings Co, gives a thumbs-up at the company's listing ceremony in Hong Kong yesterday. Sany, China's largest maker of roadheaders for coal mining, jumped as much as 33 percent on its first day of trading. CNS

HONG KONG: Newly listed companies performed strongly in the stock market yesterday, as both Sany Heavy Equipment and Fantasia saw handsome gains, but mainland banks continued to be under pressure, especially Bank of China.

As for the index itself, although the benchmark Hang Seng Index reversed early losses and ended 188 points higher at 22,611 points, analysts remained cautious.

Nonetheless, Sany Heavy, a maker of drilling and excavation equipment, had a great day, as it surged 46 percent to HK$7.03, after soaring as much as 48 percent. The company raised HK$2.4 billion selling a 25 percent stake at HK$4.80 a share in a Hong Kong IPO.

Fantasia, a Shenzhen-based property developer, climbed 2.3 percent to HK$2.23. The company sold 1.46 billion shares at HK$2.18 each, raising net proceeds of HK$2.45 billion in a Hong Kong IPO.

In contrast, shares of two of the mainland's top four listed banks continued to tumble in Hong Kong after possible capital-raising plans by lenders sparked fears of shareholder dilution.

Bank of China and China Construction Bank had notified regulators that they were working on fundraising proposals to improve their balance sheets after a lending surge in the first half of the year, according to Reuters.

Bank of China fell as much as 4.8 percent to a three-week low of HK$4.40, extending a 4 percent loss on Tuesday, while China Construction Bank was down as much as 2.1 percent, its lowest level in nearly two weeks, after falling 3.4 percent the previous session.

"In the near term, this news will be an overhang on the stock prices of the mainland banks," said Yuk Kei Lee, a senior analyst at Core Pacific-Yamaichi International.

"Because they may have to raise capital, their earnings per share will be diluted," he added.

Lee said Industrial and Commercial Bank of China, China's largest lender, was his favorite stock because it had the highest capital adequacy ratio of all the banks, at 12.6 percent.

But analysts said the sell-off in banking stocks was a normal correction on the back of their recent strong rallies. Shares in Bank of China and China Construction Bank had hit their highest levels in more than two years last week.

"The recent correction has given investors an opportunity to get in at lower levels," said Danny Yan, a portfolio manager at Taifook Asset Management. "Investors have been spooked by speculation about a potential policy tightening on the mainland, but I don't think regulators will tighten so early. The mainland's growth is on track as domestic demand is continuing to improve."

The Hang Seng China Enterprises Index, which tracks H-shares of mainland companies listed in Hong Kong, rose 0.6 percent to 13,446.09, having declined as much as 1.4 percent.

China Unicom, which took over fixed-line carrier China Netcom Group, added 2.1 percent to HK$10.78. China Telecom, the nation's biggest fixed-line operator, climbed 2 percent to HK$3.54.

China's National Development and Reform Commission said it will give telecom operators greater freedom to set prices for fixed-line calls by setting a cap on maximum charges only and allowing companies to cut fees as they compete against mobile-phone services.

Unicom and China Telecom lost a combined 18.8 million fixed-line customers this year as consumers took advantage of falling handset prices and lower mobile calling charges to switch to wireless services.

All but eight stocks on the 42-member Hang Seng Index advanced yesterday. November futures added 0.5 percent to close at 22,593.

China Daily/ Agencies

(HK Edition 11/26/2009 page4)