China shares surge on economic recovery hopes, boost Hong Kong

Last Updated: Wed, Dec 05, 2012 05:40 hrs

* HSI +1.4 pct, H-shares +2 pct, CSI300 +3.9 pct

* Midday Shanghai volume exceeds Tuesday full day total

* China urbanization-related sectors outperform

* Ping An Insurance jumps after HSBC finalizes stake sale

By Clement Tan

HONG KONG, Dec 5 (Reuters) - Onshore China shares jumped on Wednesday, boosting stocks in Hong Kong, as investors cheered comments from new Communist Party chief Xi Jinping that buoyed hopes for an economic recovery.

Both markets outperformed other Asian bourses after Xi, in comments ahead of the central economic planning meeting later this month, listed tax reform, urbanization and allowing the market to play a bigger role in setting resource prices as among his key priorities.

The CSI300 Index of the top Shanghai and Shenzhen listings jumped 3.9 percent, while the Shanghai Composite Index rose 3 percent to 2,034.6, returning above the 2,000-point level for the first time since Nov. 27.

The gains helped both onshore Chinese indexes recover further from near four-year lows touched earlier this week.

The Hang Seng Index went into the midday trading break up 1.4 percent at 22,094.2, just below its 2012 intra-day high of 22,162.5, set on Monday. The China Enterprises Index of the top Chinese listings in Hong Kong climbed 2 percent.

"We are due for a short-term bounce anyway. Xi's comments suggest he thinks the slowdown in the Chinese economy has bottomed and inflation is not going to be a big problem," said Hong Hao, chief equity strategist at Bank of Communications International Securities.

Xi's comments on urbanization helped Chinese property and railway stocks extend their strong gains this year. China Railway Group climbed 2.9 percent in Hong Kong 4.7 percent in Shanghai.

China Vanke, the country's largest developer by turnover, jumped 4.1 percent in Shenzhen to its highest since August after more than doubling sales in November from a year earlier.

Vanke is up 25 percent on the year, compared to the 5.6 percent decline on the CSI300.

In Hong Kong, property developer Evergrande soared 6.4 percent to its highest in almost five months, while China Resources Land jumped 3.5 percent, bringing its gains on the year to 67 percent.

This compares to the Hang Seng Index's 20 percent gain and the China Enterprises Index's 8 percent rise in 2012.

Angang Steel rose 3.7 percent in Hong Kong after Goldman Sachs upgraded its view from "sell" to "buy", expecting the company to turn a profit in 2013 on higher growth in steel prices than input costs as the company seeks to cut costs.


The volume of trade by midday in Shanghai exceeded Tuesday's total for the day, suggesting that domestic retail investors could be returning to the A-share market.

Gains in the onshore market could assist new listings, particularly with Chinese state-owned insurer PICC Group expected to make its Hong Kong debut on Friday after raising $3.1 billion in an offering last week that was priced near the bottom of its range.

Still, Zhengzhou Coal Mining Machinery slipped 8.5 percent from its HK$10.38 listing price in its Hong Kong debut on Wednesday after underwriters of the $300 million offering were stuck in the rare position of holding unsold stock.

Shares of Ping An Insurance jumped 4.6 percent in Hong Kong and 4.2 percent in Shanghai after HSBC Holdings said it sold its entire stake in China's second-largest insurer to a group linked to Thailand's richest man, Dhanin Chearavanont.

China Development Bank was a key backer of the HSBC stake sale, which is now Asia's second-largest deal this year. The Chinese policy bank also signed a $20 billion financing agreement with ZTE Corp .

Shares of the world's fifth largest telecom equipment maker rose 3.5 percent in Hong Kong and 5.1 percent in Shanghai. Nomura analyst Huang Leping said the contract should increase investors' confidence on ZTE to maintain steady overseas sales growth.

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