China shares jump on flash survey number, govt support speculation

Thu Dec 13, 2012 11:55pm EST

* HSI +0.6 pct, H-shares +1.4 pct, CSI300 +3.3 pct

* Shanghai Comp up 2.9 pct, back above 100-day MA

* Chinese financials lead A-share charge

By Clement Tan and Vikram Subhedar

HONG KONG, Dec 14 (Reuters) - China shares surged on Friday, rooted in speculation of new state-backed buying in mainland markets and boosted by a business survey raising hopes for stronger recovery in the world's second largest economy.

Hong Kong stocks were lifted to a 16-month high, helped by the 14-month high for the HSBC flash purchasing managers' index for December, announced shortly after markets opened.

The Hang Seng Index went into the midday trading break up 0.6 percent at 22,579.2, its highest since Aug. 2, 2011. The China Enterprises Index of the top Chinese listings in Hong Kong climbed 1.4 percent.

In the mainland, the CSI300 of the top Shanghai and Shenzhen listings jumped 2.9 percent, while the Shanghai Composite Index soared 3.3 percent. Both indexes were at their highest in more than a month.

While markets inched higher immediately following the flash PMI, talk among traders that large institutions were active buyers of domestic shares triggered a sharp rally with the Shanghai Composite punching above its 100-day moving average for the first time since May.

"With just over 10 trading days remaining in the year, this is the last window for fund managers to step into the market to ride on this rally, particularly since most of them were underweight equities," said Hong Hao, chief strategist at Bank of Communications International Securities.

On Friday, the Shanghai financial sub-index was up 4.2 percent, with Industrial and Commercial Bank of China (ICBC) rising 3 percent, shaving its fall in 2012 fall to about 4 percent. In Hong Kong, ICBC inched up 0.4 percent.

Shares of Ping An Insurance in Shanghai were set for their best day in six months, surging 5.8 percent to extend 2012 gains to 19.4 percent. Its Hong Kong shares were up 2.6 percent.

The strong showing in the A-share market also helped Chinese brokerages. In Hong Kong, Haitong Securities jumped 6.6 percent, while Citic Securities rose 3.9 percent.

Mainland investors were also encouraged by several regulatory moves.

The state-run China Securities Journal reported on Friday that the China Securities Regulatory Commission is encouraging the more than 800 listing applicants to seek alternate sources of funding in the bond market.

The regulator will also hold listing sponsors responsible if they "over package" stock offerings in a move aimed at protecting investors' interest, the same media report said.

New rules announced on Thursday will allow fund houses to seek regulatory approval for any number of mutual fund products they wish to sell at any time with the securities regulator responding within 20 days.

Traders also cited news reports of further relaxation of quotas for foreigners to invest in China, allowing for a bigger proportion for stocks. That could improve liquidity conditions for the A-share market, which has underperformed Hong Kong.

PLACEMENTS GALORE IN HK

The CSI300 and Shanghai Composite indexes, both of which fell in 2010 and 2011, are down 1.3 and 3.6 percent respectively this year. In 2012, the Hang Seng is up 22.5 percent and the China Enterprises index is up 13.7 percent.

A liquidity-fuelled rally in Hong Kong has spurred more companies to take to the market to raise funds.

On Friday, China Longyuan Power Group dived 6 percent to HK$5.20, hovering at the top end of the HK$5 to 5.20 range the wind power generator priced its HK$2.42 billion ($312 million) new share offering.