China shares up as cbank encourages lending; trade war outlook still murky

* SSEC 0.7 pct, CSI300 0.8 pct, HSI 0.3 pct

* PBOC encourages lending to small and private firms

* Health care firms fall on centralised procurement plans

SHANGHAI, Nov 16 (Reuters) - Chinese shares see-sawed on Friday to finish the morning session higher as China continues to roll out measures to support markets and private businesses, but uncertainty over progress in the Sino-U.S. trade war remains a drag on sentiment.

** At the midday break, the Shanghai Composite index was up 0.71 percent at 2,687.04 points. ** China’s blue-chip CSI300 index was up 0.77 percent, with its financial sector sub-index higher by 1.05 percent, the consumer staples sector up 0.76 percent, the real estate index up 0.81 percent and the healthcare sub-index down 1.49 percent. ** Chinese H-shares listed in Hong Kong rose 0.32 percent at 10,589.31, while the Hang Seng Index was up 0.33 percent at 26,190.33. ** China’s central bank on Friday encouraged financial institutions to make full use of incentive measures for lending to private and small firms, and maintain the sustainability of the firms’ businesses, the latest statement of support for private businesses as Beijing seeks to shore up investor sentiment and support growth. ** Official moves to ease rules around trading, fundraising and backdoor listings to prop up struggling bourses have boosted securities firms, with a sub-index tracking the sector up 2.94 percent. But they may have unintended consequences as speculators stage a forceful comeback in China’s stock market, bidding up shares in loss-making companies. ** A health care sub-index is down 1.49 percent after the government released details for centralised drug procurement. “With the release of the policy details, we expect share price pressure and volatility for the sector until the release of tender results in early-mid December,” Cyrus Ng, an analyst at Jefferies, said in a note. ** Trade war concerns showed few signs of dissipating after a senior Trump administration official told Reuters that China’s written response to U.S. demands for trade reforms is unlikely to trigger a breakthrough at talks between Presidents Donald Trump and Xi Jinping later this month, a day after news of China’s response, and the resumption of high-level trade talks, spurred hopes for a trade war detente. ** But shares in Shanghai-based firms jumped on expectations that they will benefit from a plan to enlarge the city’s free trade zone. Shanghai Waigaoqiao Free Trade Zone Group Co Ltd is 5.42 percent higher, developer Shanghai Lujiazui Finance & Trade Zone Development Co Ltd gained 8.33 percent and Shanghai Jinqiao Export Processing Zone Development is up 7.98 percent. ** The smaller Shenzhen index was up 1.04 percent and the start-up board ChiNext Composite index was higher by 0.4 percent. ** Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.34 percent while Japan’s Nikkei index was down 0.27 percent. ** The yuan was quoted at 6.9423 per U.S. dollar, 0.06 percent weaker than the previous close of 6.938. ** So far this year, the Shanghai stock index is down 19.32 percent, while China’s H-share index is down 9.9 percent. Shanghai stocks have risen 2.51 percent this month. ** The top gainers among H-shares were China Huarong Asset Management Co Ltd, up 2.58 percent, followed by China Galaxy Securities Co Ltd, gaining 2.16 percent and Byd Co Ltd, up by 2.05 percent. ** The three biggest H-shares percentage decliners were PICC Property and Casualty Co Ltd, which has fallen 2.40 percent, Sinopharm Group Co Ltd, down 1.9 percent and Anhui Conch Cement Co Ltd, down by 1.9 percent. ** About 13.12 billion shares have traded so far on the Shanghai exchange, roughly 78.5 percent of the market’s 30-day moving average of 16.71 billion shares a day. The volume traded was 20.78 billion as of the last full trading day. ** As of 04:20 GMT, China’s A-shares were trading at a premium of 17.74 percent over the Hong Kong-listed H-shares. ** In Hong Kong, the sub-index of the Hang Seng index tracking energy shares rose 0.6 percent while the IT sector rose 1.1 percent. The top gainer on the Hang Seng was BOC Hong Kong Holdings Ltd, up 2.88 percent, while the biggest loser was Sunny Optical Technology Group Co Ltd , which was down 1.91 percent.

Reporting by Andrew Galbraith; Editing by Sunil Nair