Hong Kong shares inch higher, China snaps 3-day stimulus rally

Last Updated: Tue, Sep 11, 2012 09:00 hrs

(Updates to close)

* HSI crawls up 0.2 pct, powered by HK property sector

* H-shares slip 0.2 pct, CSI300 down 0.6 pct, Shanghai sheds 0.7 pct

* Investors take profits on Chinese infrastructure after rally

* China property A-shares weak, Nanjing restricts price increase

By Clement Tan

HONG KONG, Sept 11 (Reuters) - Hong Kong shares closed higher on Tuesday to advance for a fourth straight day, tracking gains in European markets after a German court said it would rule on the the legality of the European bailout fund as scheduled on Wednesday.

Other than the German verdict, investors were also waiting the outcome of a two-day Federal Reserve meeting that ends on Thursday, with expectations that the U.S. central bank will opt for a third round of quantitative easing to boost the economy.

The Hang Seng Index reversed midday losses to end up 0.2 percent, but turnover in Hong Kong sank 25 percent from Monday to slip below its 20-day moving average for the first time in five sessions.

"Hong Kong property developers are the top choice today, with investors unwilling to push the rally in Chinese stocks any more today," said Jackson Wong, Tanrich Securities' vice-president for equity sales.

Among Hong Kong developers, Sun Hung Kai Properties rose 1.3 percent, while Henderson Land gained 1.7 percent.

Mainland Chinese markets snapped a three-day winning streak, with infrastructure-related plays among the weakest after a rally in the last three sessions fuelled by reports that Beijing had approved projects worth $150 billion.

The CSI300 Index of the top Shanghai and Shenzhen listings fell 0.6 percent, while the Shanghai Composite Index lost 0.7 percent. The China Enterprises Index of the top Chinese listings in Hong Kong slipped 0.2 percent.

General gloom over China's economy -- on track for a seventh-straight quarterly slowdown -- also weighed on sentiment despite August loan growth in China exceeding expectations.

Trade and industrial output figures earlier this week were anaemic while inflation rose, potentially limiting Beijing's scope for monetary easing.

"The latest set of data suggests the slowdown in the Chinese economy could worsen, so it's tough to look beyond the short term," said Edward Huang, equity strategist at Haitong International Securities.


Infrastructure-related stocks, among the biggest advancers in the past three sessions, gave up some of their gains to rank among the biggest losers on Tuesday.

Anhui Conch Cement , which surged 15.5 percent in Shanghai in the three days before Tuesday, shed 3.1 percent on Tuesday. It lost 1.1 percent in Hong Kong after jumping 12.5 percent in the last three sessions.

Chinese excavator maker Sany Heavy Industry shed 1.5 percent in Shanghai, while Changsha Zoomlion shed 1.7 percent in Shenzhen and 4.5 percent in Hong Kong.

Several brokerages have questioned whether the infrastructure projects reportedly approved by China's top economic planning agency amounted to new investments, saying some were approved earlier as part of local government plans.

But Huang at Haitong International said Beijing's backing was key.

"Investors must be ready to trade on policy announcements, like last Friday. It may or may not amount to anything new, but that it comes from Beijing means they are certain to be implemented, compared to local governments with strained finances," he said.

The Chinese property sector was hurt by a local media report that the city of Nanjing restricted price increases to 5 percent. The Shanghai property sub-index slipped 1.1 percent, with Poly Real Estate down 1.5 percent.

(Additional reporting by Vikram Subhedar; Editing by Simon Cameron-Moore)

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