Hong Kong shares up; China snaps 8-day gaining streak

Wed Feb 29, 2012 4:15am EST

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(Updates to close)

* HSI up 0.5 pct, Shanghai Comp down 1 pct

* Shanghai Comp up 5.9 pct in Feb, best month in 16

* Chinese developers weak after Shanghai affirms no easing

By Clement Tan

HONG KONG, Feb 29 (Reuters) - Hong Kong shares rose on Wednesday, with the benchmark index gaining for a third straight month, although strength in utilities and lower volumes pointed to caution ahead of a fresh cash injection by the European Central Bank.

China shares snapped an eight-day rising streak, dragged by developers after Shanghai reaffirmed its commitment to real estate curbs, dismissing expectations that the city will ease restrictions on property purchases.

"The Chinese property sector has been susceptible to news flows lately, said Peter So, CCB International's co-head of research, referring to the weakness in developers.

He remains, however, upbeat on developers in the medium-term, adding that they "could add to gains this year since (the sector) is likely to benefit from an easing of policy."

The China Enterprises Index of the top mainland listings in Hong Kong rose 0.6 percent. The broader Hang Seng Index ended up 0.5 percent at 21,680.1, again shy of 21,725.6, the top of a gap that opened up between Aug. 4 and 5.

The Shanghai Composite Index closed down 1 percent at 2,428.5, with a gauge of the property sector a standout underperformer, down 3 percent on the day.

In February, the Shanghai Composite Index rose 5.9 percent, its biggest monthly gain in 16, while the Hang Seng rose 6.3 percent and the China Enterprises Index added 4.7 percent.

The Shanghai government said in a statement late on Tuesday that it would stick to existing real estate policies, clarifying that only Shanghai residents qualify to buy second homes, debunking a report in official mainland media last week.

In Shanghai, Poly Real Estate lost 3.3 percent in almost double its 30-day average volume, almost paring gains from since last Wednesday when a mainland report first sparked chatter of "easing" in the embattled property sector.

Property-related sectors, such as construction and cement, were also weak. Anhui Conch Cement lost 2.9 percent in Shanghai and 2 percent in Hong Kong.

CAUTION AHEAD OF ECB, PMI AWAITED

The Chinese property sector has been a prime target in Beijing's fight against soaring inflation. Despite showing its willingness to ease policy selectively to bolster growth in the past few months, Beijing's stance has been resolutely tight-fisted on the property sector.

That could soon change, with the latest clues due on Thursday when Beijing is expected to post China's official February PMI, a measure of activity in the manufacturing sector in the world's second-largest economy.

A Reuters poll suggests it may have edged up to 50.7 in February, a five-month high, up from 50.5 in January,

On Wednesday, investors were also cautious ahead of the prospect of another round of cash injection by the European Central Bank, with the Hang Seng utilities Index an outperformer among sectors, up 2.1 percent.

Corporate earnings continued to be in focus in Hong Kong. Local developer New World Developments Co Ltd closed down 0.2 percent despite reporting fiscal first-half profit that beat expectations.

Market watchers told Reuters that while better than expectations, the earnings in New World's earnings was not strong enough to match its share price gains of 71 percent this year until Tuesday.

Standard Chartered Plc ended up 0.4 percent after posting a market-matching 10.7 percent rise in 2011 pre-tax profit at midday on Wednesday.

This compares with rival HSBC Holdings Plc's earnings on Monday, which were largely in line with expectations, but analysts were more optimistic on the growth outlook for StanChart in 2012 than for HSBC.

HSBC is up 18.6 percent this year to date, while StanChart is up 17.7 percent over the same time period, largely in line with the Hang Seng Index's 17.6 percent gain, which has been fueled largely in part to liquidity injected by central banks. (Editing by Ramya Venugopal)

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