Hong Kong shares slip from Aug 2011 high, profit taking ends China rally

Thu Dec 20, 2012 12:06am EST

* HSI -0.3 pct, H-shares -0.9 pct, CSI300 -0.7 pct

* Chinese banking shares weak after recent outperformance

* Galaxy Entertainment at record high

By Clement Tan

HONG KONG, Dec 20 (Reuters) - Hong Kong shares slipped from near 17-month highs in lackluster Thursday trade as investors took profits on recent outperformers after doubts emerged over progress on averting a fiscal crisis in the United States.

The Hang Seng Index went into the midday trading break down 0.3 percent at 22,549.2, retreating from its highest close since Aug. 1, 2011. The China Enterprises Index of the top Chinese listings in Hong Kong dropped 0.9 percent.

In the mainland, the CSI300 of the top Shanghai and Shenzhen listings shed 0.7 percent, on course for a first daily loss in five days. The Shanghai Composite Index slipped 0.5 percent.

"Trading at this time of the year can be quite tricky," said Jackson Wong, Tanrich Securities' vice-president for equity sales. "Investors are rotating out of outperformers and into some laggards on some Chinese policy catalysts."

On Thursday, Chinese banking plays were key weaknesses in both China and Hong Kong markets, extending losses after the mainland's banking regulator ordered banks to tighten checks on the sale of third-party financial products.

Shares of Bank of China (BOC) in Hong Kong, which touched 52-week intra-day highs twice earlier this week, slipped 0.6 percent. BOC shares in Shanghai shed 0.7 percent.

Growth-sensitive counters were also broadly weaker. Anhui Conch Cement slid 3.1 percent in Hong Kong, set for a third-straight daily loss after hitting on Monday its highest intra-day levels since November 2011. In Shanghai, Anhui's shares shed 2.2 percent.

Sentiment in onshore Chinese markets was also hurt by news that the National Development and Reform Commission (NDRC) is toughening up its rules on bond issuance, including banning over-indebted firms from selling new bonds.

This reignited fears of oversupply in the stock market, dousing hopes that the more than 800 companies that have reportedly applied for stock listings could look to the bond market as an alternate method of raising funds.

CHINA WIND POWER EXTEND GAINS

Bucking market weakness were some Chinese alternative energy counters, which extended gains after mainland news outlets reported that Beijing approved a second group of wind power projects.

The state-run China Securities Journal newspaper reported on Thursday that the State Council has issued new measures to support the solar industry, including subsidies and tax breaks to also benefit the wind power industry.

China Longyuan Power Group climbed 1 percent in Hong Kong.

Galaxy Entertainment Group jumped 4.2 percent to a record high, set for a fourth-straight daily gain after Deutsche Bank analysts upgraded on Monday its target price by 5.4 percent.

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