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Hong Kong shares swell to 15-month high, China slips

Source : REUTERS
Last Updated: Fri, Nov 02, 2012 06:00 hrs

* HSI +1.3 pct, H-shares +1.4 pct, CSI300 -0.5 pct

* Better China data has encouraged flows into Chinese stocks

* Smaller Chinese banks up on reported lower RRR dispension

By Clement Tan

HONG KONG, Nov 2 (Reuters) - Hong Kong shares jumped to their highest level in 15 months on Friday, as fund inflows into the Chinese territory buoyed hopes of further gains leading into the year's end and encouraged investors to build riskier positions.

Positive U.S. consumer confidence and private-sector jobs data also helped, ahead of a non-farm payrolls report later in the day that is expected to show U.S. companies added workers in October at the fastest pace in eight months.

The Hang Seng Index went into the midday trading break up 1.3 percent at 22,099.8, breaking resistance at about 22,000 on its way to its highest since early August 2011. It is up 2.3 percent on the week.

Improving macro-economic data from China has encouraged fresh money flows into Chinese equities, and market turnover for the Hong Kong bourse has risen about 20 percent on a daily average basis since the start of September.

Although flows into equity funds slowed down slightly last week, for the third time in a row, China equity funds ranked highest in terms of weekly flows, a Citi report said on Friday.

"We could see more gains from here because funds will need to chase performance as the year draws to a close," said Alan Lam, Greater China equity analyst.

"Earnings were mostly in line and misses have not been too major. With data pointing to the China economy stabilizing, we may see increased interest in Chinese equities after political uncertainty is alleviated after the 18th Congress meeting," Lam added.

The China Enterprises Index of the top Chinese listings in Hong Kong, or the H-share index, jumped 1.4 percent and is up 3.8 percent this week.

Lam said H-shares would lead any further gains, noting they are up only 9 percent on the year compared to a 20 percent climb for the Hang Seng.

But on the mainland, the CSI300 shed 0.5 percent, while the Shanghai Composite Index slipped 0.3 percent, trimming weekly gains to 1.7 and 1.6 percent respectively.

Bourse operator Hong Kong Exchange (HKEx) jumped 1.9 percent to its highest in more than six months on anticipation inflows would continue.

Chinese banks were also stronger, with shares of smaller players seeing the bigger percentage gains on the day.

The official China Securities Journal reported that the country's central bank will promote lending to small businesses by letting small and medium-sized financial institutions that meet loan growth requirements maintain relatively low reserve ratios.

In Hong Kong, China Minsheng Bank rose 1.8 percent, while Industrial and Commercial Bank of China (ICBC), the country's largest lender, rose 1 percent.

Shares of Chinese auto parts maker Zhejiang Shibao Co Ltd jumped more than six times on its Shenzhen debut, but the firm was forced to cut its fundraising plan by more than 90 percent and trading was suspended twice after triggering turnover circuit breakers and hitting a price cap.

Shibao shares in Hong Kong were down 1.4 percent, but up almost 15 percent in Shenzhen.

SECTOR ROTATION TO SWITCH?

In Hong Kong, the rotation into Chinese equities in Hong Kong is likely to come at the expense of the outperforming local property sector, as the city's government looks to rein in housing prices that have recently surpassed 1997 highs.

Hong Kong may take further measures to control runaway property prices but the Asian financial centre is likely to avoid steps such as a capital gains tax that would be complicated, Kong Kong's leader, Leung Chun-ying, said on Thursday.

Still, most property stocks rose on Friday, paring heavy losses made this week on the Hong Kong government's announcement of home purchasing curbs aimed at foreign demand.

New World Development gained 1.5 percent, but is still down 5 percent this week, set to be its worst since it slumped 8.4 percent in the week ending May 20. New World is still up 96 percent this year, a key contributor to the Hang Seng Index's 20 percent rise.




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