China shares outperform Asia, Hong Kong snaps three-week losing streak

Last Updated: Fri, Sep 07, 2012 18:50 hrs

(Updates to close)

* HSI climbs 3.1 pct, up 1.6 pct this week

* CSI300 soars 4.5 pct, up 5.1 pct on the week

* Long funds seen positioning for rally after China stimulus: traders

* Chinese infrastructure-related sectors see biggest gains

By Clement Tan and Vikram Subhedar

HONG KONG, Sept 7 (Reuters) - Mainland Chinese shares posted their best day in eight months on Friday, lifting the Hong Kong market, on growing signs that Beijing is accelerating spending to bolster growth.

In Hong Kong, traders said gains came not only from short covering, but also long-only funds positioning for a rally in the wake of the China stimulus and reduced Euro zone risks.

Every Hang Seng Index and CSI300 Index component stock finished in the black on the day.

Markets were also buoyed by the European Central Bank's decision on Thursday to launch a new and potentially unlimited bond-buying programme, aimed at cooling painfully high borrowing costs in some euro zone member countries.

The CSI300 Index of the biggest Shanghai and Shenzhen listings soared 4.5 percent, while the Shanghai Composite Index jumped 3.7 percent. Friday's gains were their best single-day showings since Jan. 17.

The Hang Seng Index firmed 3.1 percent, its best single-day gain since Dec. 1. The China Enterprises Index of the top Chinese listings spiked 4 percent.

All four indices also posted their first weekly gain in four. The CSI300 Index rose 5.1 percent, the Shanghai Composite gained 3.9 percent, while the Hang Seng Index and the China Enterprises Index each climbed 1.6 percent.

Gains came in the highest Shanghai volume since March. Even after excluding placements for AIA Group, Citic Securities and China Pacific Insurance Company (CPIC) , Friday's turnover in Hong Kong was 60 percent more than its 10-day moving average, traders said.

The Chinese machinery, cement and steel sectors were among the major gainers on news that Beijing had approved a slew of infrastructure projects this week with an estimated total value of 1 trillion yuan ($157 billion).

Changsha Zoomlion Heavy Industry surged the maximum-allowed 10 percent in Shenzhen and 8.1 percent in Hong Kong.

The latest approvals are on top of ones for 24 railway projects reported by state media on Thursday, and come ahead of a deluge of data out of China on Sunday that could confirm that a downswing in the world's second-biggest economy has stretched into a seventh straight quarter.

"These reports are a good signal that the Chinese government is prepared to do something, although these projects will take a few years to complete and won't immediately improve data in the near term," said Alan Lam, Julius Baer's Greater China equity analyst.

"It's still premature to see if this will trigger a rally from here, although investors should prepare to ride a technical rebound," Lam added.


The outperformance of the mainland Chinese markets on Friday spurred strong gains for proxies for the A-share market. Chinese insurers and brokerages broadly outperformed in Hong Kong and China.

Haitong Securities was up 7.5 percent in Hong Kong and 7 percent in Shanghai. China Life Insurance gained 3.1 percent in Hong Kong and 5 percent in Shanghai.

But the beleaguered Chinese coal and steel sectors saw the biggest moves on the day. Yanzhou Coal rose 9.1 percent in Hong Kong, but it is still down more than 32 percent this year. Angang Steel gained 8.8 percent in Hong Kong, but it is still down more than 31 percent in 2012.

Chinese excavator maker Sany Heavy Industry jumped 10 percent in Shanghai, but it remained mired near two-year lows after the company posted its biggest quarterly profit decline since 2008 on a jump in unpaid bills.

AIA Group jumped 6.8 percent to HK$28.10. Its former parent, bailed-out American International Group, raised about $2 billion after pricing a stake sale at a 0.8 percent premium to its Thursday closing price of HK$26.30. (Editing by Kim Coghill)

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