UPDATE 1-China stocks hit 2014 highs as economy bets gather steam

Mon Jul 28, 2014 2:45pm IST

Stocks

   

* HSI +0.9 pct, H-shares +0.7 pct, CSI300 +2.8 pct

* BoCom leads bank gains on plans to seek more private investors

* Hong Yuan Securities surges after trade resumes

* HKEx says no launch date decided for stock connect (Adds details, prices)

By Grace Li

HONG KONG, July 28 (Reuters) - China shares jumped on Monday, with Hong Kong's index hitting its highest close in more than 3-1/2 years, on growing bets that the world's second-largest economy has turned a corner and as investors expect more growth-friendly policies.

Helped by some ultra cheap valuations, banks soared after a Reuters report said the country's fifth-biggest bank by assets planned to seek more private investors.

The Hang Seng Index closed up 0.9 percent at 24,428.63 points at its highest since November 2010. The China Enterprises Index of the top Chinese listings in Hong Kong rose 0.7 percent at its highest close since December 11.

The CSI300 of the leading Shanghai and Shenzhen A-share listings jumped 2.8 percent, while the Shanghai Composite Index gained 2.4 percent to 2,177.95 points.

The jump put the onshore share indices squarely in the black for the first time this year after a disappointing recent performance.

The rally in the markets which began last week gathered steam on Monday and has been helped by a slew of recent optimistic news which has propped up emerging market indices.

Better-than-expected China July HSBC flash PMI, lower financing costs, loosening curbs on property policies and the coming investment connection between the Shanghai and Hong Kong stock markets were cited as factors behind the rally.

Both onshore indexes closed at their highest this year in their best day since March 21. Gains in Shanghai came in the strongest bourse volume since September.

China's Bank of Communications Co Ltd (BoCom) plans to sell stakes to private investors under a government reform aimed at letting private capital play a bigger role in the economy, two people familiar with the matter told Reuters on Friday.

BoCom jumped 9.9 percent in Shanghai, its biggest daily gain since September 2013. Its Hong Kong listing was the top percentage gainer on the Hang Seng, up 6.2 percent to an almost 8-month high.

"The impending plan is likely to change the previous structure. It will allow non-state capital to enter the management levels," said Chen Xingyu, an analyst from the Shanghai branch of Phillip Securities (Hong Kong) Limited.

"When it's changing structure, investors are also anticipating details of the stock incentive plans which will be introduced at the management level," said Chen, who added such a change would link management's dividends and salaries far more closely to the banks' development, which will boost efficiency at state banks.

The sector was further supported by the issuance of preference shares by the country's biggest lender Industrial And Commercial Bank Of China , which helped relieve fears of dilutive common capital raisings as Chinese banks rush to replenish their balance sheets to meet new global rules.

The Shanghai financials sub-index added 4.2 percent, its biggest rise in fourth months. Hong Kong and Shanghai listings of China's "Big Four" banks all rose between 1 and 3.5 percent.

Top index boost Tencent rose 3.2 percent. It won approval from China's banking regulator late on Friday to set up a bank in the Qianhai economic zone in southern China's Guangdong province with two local firms.

Hong Yuan Securities soared the maximum allowed 10 percent after trade resumed on Monday. The firm said late on Friday its management had agreed to be bought by Shenyin & Wanguo Securities for 39.6 billion yuan ($6.40 billion), creating China's third-biggest brokerage.

Shares of brokerage firms were also bolstered by a National Business Daily report, which said the launch date for the Hong Kong-Shanghai Stock Connect scheme has been set for Oct. 13, allowing direct investment between the two markets for the first time.

The mainland's two largest-listed names in the sector - CITIC Securities and Haitong Securities - both spiked more than 4 percent.

But Hong Kong Exchanges and Clearing clarified on Monday afternoon there was not an explicit launch date yet.

($1 = 6.1860 Chinese yuan) (Additional reporting by Engen Tham in Shanghai; Editing by Saikat Chatterjee & Kim Coghill)

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