China shares have best day in 3 mths, Hong Kong hits highest since Aug 2011

Wed Dec 5, 2012 4:34am EST

* HSI +2.2 pct, H-shares +2.9 pct, CSI300 +3.6 pct

* Xi's policy comments spurs highest best Shanghai volume since Sept

* China property, financials, infrastructure-related sectors soar

* Ping An Insurance jumps after HSBC finalizes stake sale

By Clement Tan

HONG KONG, Dec 5 (Reuters) - Chinese shares had their best day in three months on Wednesday, lifting Hong Kong to its highest since August 2011 after comments by the new head of the Communist Party about the government's economic priorities boosted optimism.

Chinese property and infrastructure stocks were among the top gainers after Xi Jinping listed tax reform, urbanization and a bigger price-setting role for the market as key objectives. He was speaking ahead of the party's central economic planning meeting this month.

The Hang Seng Index closed up 2.2 percent at the day's high at 22,270.9, surpassing the previous intra-day high set on Monday. The China Enterprises Index of the top Chinese listings in Hong Kong jumped 2.9 percent.

In the mainland, the CSI300 of the top Shanghai and Shenzhen listings soared 3.6 percent. The Shanghai Composite Index climbed 2.9 percent to 2,031.9, returning above the 2,000-point mark for the first time in more than a week.

The day produced the strongest gains for both indexes since Sept. 7 that helped claw back losses in the last two weeks that left them languishing at their lowest in almost four years.

"Xi's comments suggest he thinks the slowdown in the Chinese economy has bottomed and inflation is not going to be a big problem," said Hong Hao, chief equity strategist at Bank of Communications International Securities.

Turnover in Hong Kong hit the highest since March 6, partly due to HSBC Holdings' sale of its stake in Ping An Insurance for $9.4 billion in Asia's second-largest deal this year.

Excluding the Ping An deal, Hong Kong turnover totalled HK$79.6 billion, which roughly equalled Tuesday's total turnover.

Xi's comments on urbanization helped Chinese property,railway and infrastructure-related stocks extend their strong gains this year.

China Vanke, the country's largest developer by turnover, jumped 2.1 percent in Shenzhen to its highest since August after more than doubling sales in November from a year earlier.

Vanke is up 22.4 percent on the year, compared to the 5.9 percent decline on the CSI300.

In Hong Kong, Chinese property developer Evergrande soared 8.8 percent to its highest in almost five months, while China Resources Land rose 2.6 percent, bringing its gains on the year to 65 percent.

This compares to the Hang Seng Index's 21 percent gain and the China Enterprises Index's 9 percent rise in 2012.

Anhui Conch Cement jumped 5 percent in Hong Kong and 4.9 percent in Shanghai.

Angang Steel rose 3.7 percent in Hong Kong after Goldman Sachs upgraded its view from "sell" to "buy", expecting the company's margin pressures to ease in 2013 as it cuts operating costs and as higher growth in steel prices offsets input costs.

DEALS, DEALS, DEALS

Although Xi's comments largely repeated priorities previously articulated in November by China's vice-premier and finance minister, Shanghai bourse volume was the best since Sept 7, when stocks jumped after a raft of infrastructure project approvals was perceived as Beijing policy support.

The resurgent A-share market also spurred strong gains for the Chinese brokerage sector. Citic Securities jumped 5.2 percent in Hong Kong and 3.8 percent in Shanghai.

Chinese banks also rose, with smaller banks seeing bigger percentage gains in the mainland. China Minsheng Bank soared 5.1 percent in Hong Kong and 4.5 percent in Shanghai.

Strong Shanghai volumes on Wednesday could suggest domestic retail investors are finally returning to the A-share market, which could bode well for new listings.

Chinese state-owned insurer PICC Group is expected to make its Hong Kong debut on Friday after raising $3.1 billion in an offering last week that was priced near the bottom of its range.

Still, Zhengzhou Coal Mining Machinery slipped 9 percent from its HK$10.38 listing price in its Hong Kong debut on Wednesday after underwriters of the $300 million offering were stuck in the rare position of holding unsold stock.

Ping An Insurance shares jumped 4.9 percent in Hong Kong and 4.1 percent in Shanghai after HSBC sold its 15.6 percent stake in China's second-largest insurer to a conglomerate controlled by Thailand's richest man, Dhanin Chearavanont.