China shares reverse early gains, unwind fast Hong Kong start

Last Updated: Mon, Dec 09, 2013 04:40 hrs

* HSI +0.3 pct, H-shares +0.5 pct, CSI300 -0.1 pct

* Exporters lifted by strong China Nov exports, U.S. jobs report

* Chinese property slides after Xiamen tightens pre-sales requirements

* Chinese financials A-shares diverge vs H-shares after reform reports

By Clement Tan

HONG KONG, Dec 9 (Reuters) - China shares reversed gains early on Monday, helping unwind a fast start to the week in Hong Kong markets as China's robust November exports and benign inflation prompted some short covering in growth-sensitive counters offshore.

The Chinese banking sector led a intra-day reversal of gains in the mainland after the central bank released rules on Sunday for trading of certificates of deposit -- its latest step towards interest rate liberalisation.

At midday, the CSI300 of the leading Shanghai and Shenzhen A-share listings was down 0.1 percent after rising by as much as 0.7 percent at one point, while the Shanghai Composite Index also slipped 0.1 percent.

The Hang Seng Index was up 0.3 percent at 23,810.7 points. The China Enterprises Index of the top offshore Chinese listings in Hong Kong rose 0.5 percent after rising by as much as 1.4 percent earlier.

"Flows tapered off after the early morning rush. We are going to need a more definitive catalyst for the market to meaningfully move any higher from here," said Jackson Wong, Tanrich Securities' vice-president for equity sales.

"As a policy signal, the various headlines over the weekend and today suggest Beijing could be moving faster than anybody is expecting on financial reforms. But reforms will hurt the banking sector in the short run," Wong added.

While the banking sector as a whole was sluggish in the mainland, there were mostly gains in the offshore market.

China Minsheng Bank slipped 0.6 percent in Shanghai and climbed 1.7 percent in Hong Kong, but both are off their respective day's highs. Agricultural Bank of China (AgBank) sank 0.8 percent in Shanghai and was flat in Hong Kong.

Most non-banking financials were helped by several other news reports alluding to a faster pace of financial reforms. China Pacific Insurance Group Co (CPIC) climbed 2.4 percent in Hong Kong and 0.6 percent in Shanghai.

Chinese regulators reaffirmed commitments to widen the yuan's trading band at the appropriate time, the official China Securities Journal reported on Monday, citing deputy central bank governor Pan Gongsheng.

The same newspaper reported Yan Qingmin, a vice chairman at the China Banking Regulatory Commission as saying plans are afoot for bank bankruptcy rules regulations to be introduced to strengthen deposit protection.

China will launch a 401K-style tax-deferred retirement pension investment scheme in January 2014, state media reported on Monday, potentially boosting stock and bond market performance as new funds enter China's capital markets.

Investors will be looking to an annual economic work meeting due to be held some time this week, along with two others for urbanization and agricultural policy, where China's leaders will convene to set economic growth targets to gauge the execution of Beijing's bold reform agenda.

Official data on Monday showed China's annual inflation unexpectedly slowed to 3 percent in November from an eight-month high, following data on Sunday that showed exports spiked 12.7 percent from a month earlier, handily beating forecasts. More data is due later this week.

Port operator China Merchant Holdings spiked 4.6 percent, while global supply chain manager Li & Fung climbed 0.8 percent, both largely on short covering.

Both were also helped by a solid U.S. jobs report last Friday, which however weighed on the Hong Kong property sector on fears that any consequent reduction in the U.S. Federal Reserve's asset purchases could spur a correction in property prices.

New World Development sank 0.6 percent, while Henderson Land fell 0.7 percent. Bank of East Asia , a Hong Kong-focused bank, sank 0.9 percent.

Chinese property developers sank on fears that more curbs are in store. In Hong Kong, Country Garden and China Resources Land sank nearly 3 percent. Poly Real Estate shed 1.1 percent in Shanghai.

Several second-tier cities have issued fresh home purchasing curbs in the last few weeks. Local media reported on Monday that authorities in the eastern coastal city of Xiamen in Fujian province has circulated revised regulations further tightening pre-sales permits from Jan. 1.

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