China shares to snap 4-day losing streak, Hong Kong strong too

Fri Nov 30, 2012 11:14am IST

Stocks

   

* HSI +0.6 pct, H-shares +1.3 pct, CSI300 +0.9 pct

* HSI set to outperform A-shares for 6th straight month

* China equities see 11th straight week of net flows: EPFR

* HKEx down 1 pct after $1 bln new share issue to fund LME purchase

By Clement Tan

HONG KONG, Nov 30 (Reuters) - Mainland Chinese shares were set for their first gain this week on Friday, joining Hong Kong by advancing ahead of data due over the weekend expected to show that China's factory activity expanded at its fastest pace in seven months in November.

Hong Kong shares were set to show a gain for the third month in a row, outperforming onshore markets for a sixth straight month and extending a divergence that has reversed the premium that A-shares typically trade over H-shares.

On Friday, the Hang Seng Index went into the midday trading break up 0.6 percent at 22,051.4 points, while the China Enterprises Index of the top Chinese listings in Hong Kong rose 1.3 percent. They are up 1.9 and 0.4 percent on the month.

On the mainland, the CSI300 Index of the top Shanghai and Shenzhen listings climbed 0.9 percent, while the Shanghai Composite Index rebounded 0.6 percent from its lowest closing level since January 2009, set on Thursday.

They were down 5.3 and 4.6 percent this month, respectively.

"Fund managers in the mainland are not sure the A-share market has bottomed and are looking for ways to switch to H-shares or other higher-yielding investment vehicles," said Edward Huang, chief strategist at Haitong International Securities.

"They are also beginning to think about switching out of the sectors that have outperformed this year, but investors shouldn't expect too much from policy reforms from China's annual central economic meeting in mid-December," Huang added.

Data from EPFR Global, a firm that tracks global fund flows and asset allocation, showed China equities had an eleventh week of net inflows last week, amid the largest equity inflows globally last week in two years, according to Bank of America-Merril Lynch analysis.

On Friday, the Chinese property sector, which has outperformed strongly this year, was once again strong. China Resources Land jumped 5.3 percent to HK$21.05, taking its gains on the year to 69 percent.

Chart resistance is seen at HK$20.85, which is its previous high recorded on Oct. 21, 2009.

Chinese growth-sensitive plays were also broadly stronger. Anhui Conch Cement, the largest cement producer in the mainland, jumped 3.4 percent in Hong Kong and 4.9 percent in Shanghai.

China's official purchasing managers' index (PMI) in November may have rebounded to 50.6 from October's 50.2, the median estimate of 11 economists polled by Reuters showed. A reading above 50 points points to accelerating activity.

ALCOHOL KEY IN AWFUL A-SHARE NOVEMBER

A contamination scare last week involving Jiugui Liquor worsened losses on the month for the alcohol sector, after repeated anti-corruption calls by China's top leaders in the lead up to the 18th Communist Party Congress earlier this month put pressure on a sector that had been outperforming.

Jiugui Liquor slid 2.2 percent on Friday. It has now lost a third of its market cap since it resumed trading last Friday after a four-day suspension following press reports alleging its products contained excessive toxic materials.

Sector heavyweight Wuliangye was down 1 percent on Friday, bringing its losses to 20 percent in November, its worst monthly performance in more than four years.

Kweichow Moutai was up 28 percent on the year at the end of October, but losses exceeding 13 percent in November have trimmed its annual gain to 11.3 percent.

The brokerage sector, which was hit by speculation of possible commission fee cuts that could further hurt their profitability, was mixed despite local media reporting otherwise on Friday, citing unnamed officials from China's securities regulator.

Larger brokerages such as Citic Securities recovered, rising 0.8 percent in Shanghai, but smaller players stayed weak. The sector broadly rebounded in Hong Kong, with Citic up 1.9 percent in strong volumes.

Hong Kong Exchange (HKEx) shed 1 percent to HK$123.60 after it raised $1 billion to fund its takeover of the London Metal Exchange. A new issue of 65.705 million shares was priced at HK$118 each, a 5.45 percent discount to its closing price on Thursday.

The Hong Kong government said in late morning trade on Friday that it will subscribe to $58 million worth of new HKEx shares.

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