China shares ease after rally, AIA's gain helps Hong Kong

Last Updated: Tue, Dec 11, 2012 09:01 hrs

* HSI up 0.2 percent, H-shares index flat

* CSI300 slips 0.6 pct, Shanghai Comp down 0.4 pct

* Citic Pacific up 3.9 pct after tapping debt market

* AIA up 2.8 pct, Kweichow Moutai shares rebound

* Nomura sees shift from bonds to equities in 2013

By Vikram Subhedar

HONG KONG, Dec 11 (Reuters) - Chinese shares eased from the previous session's one-month high with weak mainland markets paring Hong Kong's gains as investors stayed cautious ahead of the U.S. Federal Reserve's last policy meeting in 2012.

The Hang Seng index ended Tuesday up 0.2 percent to 22,323.9, largely on the back of a 2.8 percent surge for shares of insurer AIA. The China Enteprises index of top locally listed mainland firms closed flat.

In China, the CSI300 of top Shanghai and Shenzhen listings fell 0.6 percent to 2,258.5 while the Shanghai Composite shed 0.4 percent to close at 2,074.7.

But light profit-taking followed Monday's rally in mainland markets after data showed China's banks lent more slowly than expected in November while the pace of total financing eased.

"It was definitely a choppy session," said a Hong Kong-based trader. "Regional investors were watching every tick on the Shanghai Composite."

Traders and analysts said the that the focus now shifts to the U.S. Fed, which begins a two-day meeting later on Tuesday.

The Fed is expected to announce it will buy $45 billion per month of longer-dated Treasuries beginning in January to replace the Operation Twist programme, which expires on Dec. 31.

Easing by major central banks globally to kickstart their economies has sparked a rush of capital into Hong Kong, prompting the territory's monetary authority to repeatedly intervene in currency markets to defend the HK dollar's peg.

In the latest intervention, the Hong Kong Monetary authority sold HK$6.2 billion ($800 million) in Hong Kong dollars as the local currency hit the strong end of its trading range.

Analysts expect steadily improving global economic data to keep supporting the flow of funds into Asia in 2013 as investors boost positions in risky assets.

"Asian and Japan equities will be one of the recipients of money flow out of Treasuries," said Michael Kurtz, chief Asia equity strategist at Nomura.

"We are basically overweight all of north Asia at the expense of Southeast Asia and India where we are predominately underweight," said Kurtz.


Shares of Citic Pacific rose 3.9 percent and were the most actively traded stock on the Hang Seng after the company, mired in financing issues related to its Australian projects, tapped debt markets to raise up to $250 million.

Insurer AIA, the top performing Hang Seng component after Citic, rose after the U.S. Treasury said it had launched the sale of its remaining stake in American International Group .

On the mainland, the beleaguered white liquor sector got a lift after biggest producer Kweichow Moutai rebutted reports it used additives in its products. Shares of the company, which went untraded on Monday, were up 1.8 percent.

Real estate stocks were weaker in China as investors locked in gains following the recent rally.

Poly Real Estate lost 2.1 percent while China Vanke shed 1.1 percent.

Volumes remained relatively healthy in Shanghai, suggesting retail investors, who were burned by nearly three years of weak markets, were slowly getting back into stocks.

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