Hong Kong, China shares down, small and mid-caps hammered

Last Updated: Wed, Apr 25, 2012 05:41 hrs

(Updates to midday)

* HSI down 0.3 pct, CSI300 down 1.6 pct

* Small- and mid-sized caps extend bleed on stringent listing rules

* Mainland investors moving into large caps: traders

* Chalco up after Winsway acquisition

By Clement Tan

HONG KONG, April 24 (Reuters) - China shares slumped on Tuesday, hit by weakness in small- and mid-sized caps for a second-straight day on fears that fresh guidelines could trigger a spate of delistings in the cash-strapped sector, dragging Hong Kong markets into the red.

The official Shanghai Securities News reported on Tuesday that regulators are mulling a removal of government subsidies in the calculation of company profitability, a move exacerbating fears that more counters could be forced to delist.

The Shanghai Composite Index shed 1.4 percent at midday, while the CSI300 Index slid 1.6 percent. Hong Kong's Hang Seng Index closed down 0.3 percent.

"This move is a plus for the mainland markets in the long run, but in the short run, could trigger a flight of funds from the small- and medium-cap names to the relative safety of large cap names," said Cao Xuefeng, head of research at Huaxi Securities in Chengdu.

The CSI500 Index, a gauge of small- and medium-cap listings in both Shanghai and Shenzhen, was a notable underperformer, down 3.3 percent. The Shenzhen Composite Index , where the bulk of the sector is listed, slid 3.1 percent.

Traders said the Shanghai bourse accounted for about 60 percent of overall volume in mainland Chinese markets, up from 55 percent in recent trading days and the typical 50-50 split with Shenzhen. Midday A-share turnover in Shanghai was the highest since March 29, 2011.

According to Thomson Reuters I/B/E/S, A-shares listed on the Shanghai bourse are currently trading at 9.1 times forward 12-month earnings, compared to Shenzhen's 14.8 times, suggesting the rollover play could go on for some time.


China Life Insurance , the mainland's largest insurer, gained 0.7 percent in Shanghai and was flat in Hong Kong, making the company a relative outperformer.

Another report in Shanghai Securities News suggested Shanghai city authorities could launch a tax-deferrable pension pilot programme that could generate up to 10 billion yuan ($1.6 billion) in additional insurance premiums annually.

Mid-sized Chinese banks also held onto gains at midday after Bank of Beijing posted forecast-beating quarterly earnings after markets closed on Monday. Bank of Beijing jumped 2.8 percent in midday volume that more than triple its 30-day average.

Aluminum Corp of China Ltd gained 1.3 percent after the company said it has agreed to buy 29.9 percent of imported coking coal supplier Winsway Coking Coal Holdings Ltd for HK$2.39 billion ($307.92 million) to strengthen its downstream logistics operations. (Additional reporting by Vikram Subhedar; Editing by Richard Borsuk)

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