China shares extend gains, Hong Kong eases from 16-mth high

Sun Dec 16, 2012 11:58pm EST

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By Vikram Subhedar

HONG KONG, Dec 17 (Reuters) - China shares rose by midday on Monday as investors were encouraged by more signs of reforms to come, and a strong move higher last week put the onshore markets on course to show their first yearly gain since 2009.

After an annual policy-setting conference presided over by new Communist Party Chief Xi Jinping on Sunday, the official Xinhua news agency reported that China will maintain steady economic polices in 2013, leaving room for manoeuvre in the face of global risks while deepening reforms to support long-term growth.

That helped boost sentiment, to extend last week's rally, and the CSI300 of top Shanghai and Shenzhen listings went into thelunch break 0.7 percent up and is now trading in positive territory on the year. The Shanghai Composite rose 0.5 percent.

In Hong Kong, the Hang Seng index eased slightly from Friday's 16-month high, dragged lower by oil producers and heavyweight HSBC Holdings, ending the morning session down 0.4 percent at 22,521.8. The China Enterprises index closed flat.

Steps by Chinese authorities to boost confidence in domestic markets along with hopes that China's new leaders will succeed in stabilizing growth and push through reforms have triggered a rebound off of multi-year lows hit earlier this month.

The CSI300, comprising China's large-cap stocks, is up 12.9 percent since its Dec. 4 low.

"Overall, the resolution of the leadership contest is positive for the Chinese market," said Martha Wang, portfolio manager of Fidelity's China Focus Fund, in an emailed statement.

"There are many companies with strong fundamentals, which have been indiscriminately punished by political uncertainty, trading at attractive valuations," said Wang.

Coal producers led a rebound in the materials sector on mainland markets with China Shenhua up 1.9 percent. Yangquan Coal rose 8.2 percent.

Premium liquor producers, hit in recent weeks by concerns over contamination, rebounded with Wuliangye up 4.4 percent and Kweichow Moutai up 2 percent.

HANG SENG DOWN, AIA HALTED

The Hang Seng index was dragged lower by large-cap stocks falling, after having been the key beneficiaries of fund inflows into the territory's stock markets over the past few months.

HSBC shares, which hit their highest level since June 2011 last Friday, fell 0.9 percent, and Chinese internet giant Tencent Holdings, which set a record high last month, was off 1.8 percent.

Shares of AIA Group were suspended from trading after American International Group launched a $6.5 billion offering of its remaining stake in the Asian insurer.

AIA shares are up 30.5 percent this year and have soared more than 60 percent since the company's $20.5 billion IPO two years ago as it became a top choice of fund managers looking to benefit from growing wealth in Asia.

Another investor-favourite Sands China, the only Macau casino stock to be a part of the Hang Seng, slipped 1.6 percent on profit-taking in one of the year's outperformers.

Sands China shares, which hit a record high last week, fell 1.6 percent. The stock is still up nearly 55 percent this year compared to a 22.2 percent rise for the Hang Seng.

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