China shares return to near 4-year lows, sinking Hong Kong too

Mon Dec 3, 2012 4:35am EST

* HSI -1.2 pct, H-shares -1.5 pct, CSI300 -1.4 pct

* A-shares return to near 4-year lows, China PMIs fail to cheer

* China booze makers hammered, Kweichow Moutai barely up on year

* Haitong Securities slumps after DB downgrade

By Clement Tan

HONG KONG, Dec 3 (Reuters) - Shares on mainland China fell to their lowest since early 2009 on Monday, dragging Hong Kong into a loss, as investors shrugged off upbeat Chinese factory data and booked profits on some recent outperformers.

Stocks of alcohol makers, which were battered in November on a contamination scare and anti-corruption rhetoric from China's top leaders, lost ground again as did banking shares after China's Huaxia Bank blamed an employee for selling a wealth management product without perimission.

The Hang Seng Index closed down 1.2 percent at 21,767.9 after hitting an intra-day 2012 high at 22,16.5. The China Enterprises Index of the top Chinese listings in Hong Kong slid 1.5 percent.

In the mainland, the CSI300 Index of the top Shanghai and Shenzhen listings shed 1.4 percent, while the Shanghai Composite Index lost 1 percent. Both closed at their lowest since February and January in 2009.

The falls came even as markets in Asia were boosted by a survey showing manufacturing in China quickened for the first time in 13 months in November.

"There's some profit taking today, the market's gone ahead of itself with Friday's gains," said Jackson Wong, Tanrich Securities' vice-president for equity sales.

Losses in Shanghai came in the highest bourse volume since Nov. 9, while in Hong Kong, turnover on Monday was a third less than Friday's.

Shares of Silver Base, a premium alcohol distributor in the mainland, fell 4.9 percent after it posted an 85 percent fall in revenue in the six months to end-September.

The stock has now lost 13.2 percent since the company warned of a profit loss on Nov 20 and is languishing at its lowest close in three years.

Other alcohol industry heavyweights, Kweichow Moutai and Wuliangye extended their November downward spiral, diving 7.3 and 9.9 percent respectively.

The sector was pummelled in November by a contamination scare involving Jiugui Liquor and anti-corruption rhetoric by top leaders as they gathered at the 18th Communist Party Congress for China's once-in-a-decade political transition.

Chinese officials are often presented with gifts of expensive alcohol by people seeking favours.

Shares of Moutai, which is the most expensive brand in the sector, was up 28 percent on the year at the end of October, but is now just 3.6 percent stronger on the year. Moutai has now wiped out $6.8 billon of its peak $42.8 billion valuation set in July.

Chinese banks were broadly weaker with Hua Xia falling 4.2 percent in Shanghai while Industrial and Commercial Bank of China (ICBC) slid 1.5 percent in Hong Kong and 0.5 percent in Shanghai.

Hua Xia Bank blamed a Shanghai branch employee for selling a wealth management product without permission after Chinese media said the product could not repay investors.

Chinese property counters were broadly weaker in Hong Kong as investors took profit, but rose in onshore Chinese markets.

China's home prices edged up for a sixth straight month in November, a private survey showed, reinforcing signs of a gentle recovery in the property market as the government seeks to bolster economic growth.

While China Resource Land lost 2.7 percent in Hong Kong -- trimming 2012 gains to 61.5 percent, compared to the Hang Seng Index's 18 percent rise -- Poly Real Estate climbed 2.4 percent in Shanghai.

KEEP CALM AND CARRY ON

Chinese insurers were buoyed by comments from a top official at the country's securities regulator reiterating a commitment to broaden investment channels for social security and insurance funds.

Traders at a top Chinese brokerage said A-share funds were rotating from the mainland banking sector into insurers and property developers after the positive survey readings over the weekend.

In Shanghai, China Life Insurance, the country's largest insurer, rose 0.9 percent, while smaller rival Ping An Insurance rose 0.4 percent.

But their strength did little to stop mainland Chinese markets hitting 2009 lows on Monday despite an editorial in the state-run China Securities Journal urging A-share investors to stay calm.

Several lockup expiries in December and a congested IPO pipeline could force the onshore Chinese market to further weakness.

Haitong Securities dived 4.2 percent in heavy volumes, heading losses among Chinese brokerages in Hong Kong after a downgrade by Deutsche Bank analysts from "buy" to "hold".

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