Hong Kong shares near 2012 high, China climbs on stabilising economy

Thu Oct 18, 2012 5:13am EDT

(Updates to close)

* HSI +0.5 pct, H-shares +1.4 pct, CSI300 +1.5 pct

* No strong Beijing policy support until March: Julius Baer

* China Coal hits 2-mth high in HK ahead of Q3 earnings Monday

* Li & Fung jumps after more positive U.S. data

By Clement Tan

HONG KONG, Oct 18 (Reuters) - Hong Kong shares closed at a seven-month high on Thursday on signs that the slowdown in China's economy is stabilising, with growth-sensitive sectors leading a sixth straight session of gains.

Official data showed the world's second-largest economy grew 7.4 percent in the third quarter from a year earlier, but positive September industrial output and retail sales raised hopes that the Chinese economy may have turned a corner.

The Hang Seng Index ended up 0.5 percent at 21,518.7, the highest close since March 2 and equalling a winning streak recorded a year ago. The benchmark is now just 1.1 percent shy of the 2012 intra-day high at 21,760.3, recorded on Feb. 20.

The China Enterprises Index of the top Chinese listings in Hong Kong, also known as the H-share index, jumped 1.4 percent. Gains were stymied by chart resistance at about 10,673, the bottom of a gap that opened between May 4 lows and May 7 highs.

In the mainland, the CSI300 Index of the top Shanghai and Shenzhen listings ended 1.5 percent higher at its highest close since Aug. 14. The Shanghai Composite Index rose 1.2 percent.

"Investors have been adding more risk to their portfolio, with funds trying to improve their performance as the year comes to a close," said Alan Lam, Julius Baer's Greater China equity analyst.

"But with data suggesting growth in China has stabilised, the current leadership will not see any need to act more aggressively," Lam said, adding that strong action was only likely to come after the leadership transition is completed in March.

Offshore China shares have outperformed mainland-listed peers by 10 percentage points over the past month as foreign investors, more sensitive to global central bank easing, put money back to work quicker than China's domestic retail investors.

But on Thursday, volume in Shanghai jumped 45 percent from Wednesday and to its highest since Sept 14, in a sign that onshore investors were gearing up for a fourth quarter rally too.

EARNINGS BACK IN FOCUS

China Coal Energy Co Ltd , the country's second-largest coal producer, rose 2.3 percent to its highest close since Aug. 8 in Hong Kong and 1.3 percent in Shanghai, as investors rotated into laggard sectors ahead of the third-quarter earnings season, starting next week.

After lagging the market for most of the year, China Coal jumped 9.6 percent in Hong Kong last month and is now up 9 percent this month ahead of its third-quarter earnings, expected on Monday.

It is still down 7.8 percent this year, compared to the 17 percent gain on the Hang Seng Index and the 7 percent gain on the China Enterprises Index. China Coal is currently trading at nearly half its historical median price-to-book value, according to Thomson Reuters StarMine.

In the last 30 days, three of 35 analysts have shaved their full year 2012 earnings-per-share estimate for China Coal by an average of 10.2 percent, according to StarMine.

China Life Insurance slipped 1.1 percent in Hong Kong after the world's largest insurer by market value issued a profit warning late on Wednesday that signalled its first quarterly loss since 2008.

Shares of Li & Fung, a global supply chain manager for Walmart Inc and Target was the top gainer among Hang Seng Index components.

It jumped 4.4 percent after better-than-expected U.S. housing data on Wednesday followed positive retail sales data earlier this week, but is still down more than 10 percent in 2012. (Additional reporting by Vikram Subhedar; Editing by Sanjeev Miglani)