China shares slip from three-week high, Hong Kong weaker too

Thu Dec 6, 2012 4:34am EST

* HSI -0.1 pct, H-shares +0.3 pct, CSI300 -0.2 pct

* Moutai almost flat on year, contamination fears linger

* AIA slips after Khazanah stake sale, AIG lockup expires

* China urbanization policy plays strong

By Clement Tan

HONG KONG, Dec 6 (Reuters) - Chinese shares slipped from three-week highs on Thursday, knocking Hong Kong off its highest in more than a year, as liquor makers came under renewed pressure over contamination fears.

Investors, however, continued to buy into Chinese financial and urbanization-related sectors, a day after comments from the new Communist Party chief setting the economic agenda for 2013 had lifted the A-share market off four-year lows.

The Hang Seng Index closed down 0.1 percent, after opening at its highest intra-day level since August last year. The China Enterprises of the top Chinese listings in Hong Kong crept up 0.3 percent.

In the mainland, the CSI300 Index of the top Shanghai and Shenzhen listings slipped 0.2 percent, while the Shanghai Composite Index edged down 0.1 percent from its highest since Nov. 14 set on Wednesday.

Hong Kong turnover and Shanghai volume each slipped more than 30 percent from Wednesday's elevated levels, but were still some way above their respective averages in the last 30 days.

Shares of China's top premium white spirit maker Kweichow Moutai fell 5.8 percent in Shanghai as concerns over excessive use of toxic substances lingered. Up nearly 30 percent on the year at the end of October, Moutai is now barely 0.5 percent stronger in 2012.

Traders cited talk that independent tests on Moutai products bought in Hong Kong could show further evidence of excessive levels of plasticiser.

Shares of Mengniu Dairy shed 0.5 percent to its lowest since end-June over similar concerns of contamination.

It is now down 6.4 percent this week, set for its worst week in 2012. Chinese media reported that one of its yoghurt products for children contains banned substances, which the company has since denied.

"If previous scares with Mengniu Dairy is any indication, it will be a while before enthusiasm for these alcohol producers return," said Edward Huang, an equity strategist with Haitong International Securities.

CHINA POLICY PLAYS STRONG

In Hong Kong, HSBC Holdings slipped 0.5 percent after Reuters reported that Europe's largest bank may pay a $1.8 billion fine to U.S regulators as part of a settlement over money laundering lapses.

Asian insurance giant AIA Group shed 0.3 percent to HK$30.10, at the top end of the HK$29.84-HK$30.20 range that Malaysia's state investor Khazanah Nasional Bhd's priced its $360 million offering of AIA shares.

Khazanah's selldown comes ahead of the expiration of a lockup on AIA shares for American International Group on Thursday, when the U.S. insurer will be free to sell a stake worth $6.4 billion at current market prices.

Smaller Chinese banks extended Wednesday's gains after the country's insurance regulator abolished, late on Tuesday, investment limits on the country's banks for insurance firms that previously prevented them from investing in more than two banks if their ownership of individual banks exceeded 5 percent.

China Merchants Bank rose 2.4 percent in Hong Kong and 0.4 percent in Shanghai, while Bank of Beijing jumped 4.5 percent in Shanghai to a five-month high and was among the top boosts to the CSI300.

Shares of Chinese insurers were marginally weaker on Thursday after strong gains on Wednesday. China Life Insurance slipped 0.2 percent in Hong Kong and 0.5 percent in Shanghai.

Chinese property counters were among the outperformers, extending their strong gains on the year after new Communist Party chief Xi Jinping listed tax reform, urbanization and a bigger price-setting role for the market as key objectives.

His comments, published late on Tuesday, came ahead of the party's central economic planning meeting later this month.

"Investors are aligning themselves along Beijing policy lines more aggressively now after Xi Jinping's comments, but we still lack details on the exact implementation," Haitong's Huang said.

China Vanke rose 1.4 percent in Shenzhen, while China Resources Land climbed 1.7 percent in Hong Kong, stretching its gains on the year to almost 70 percent.