Hong Kong shares soar to 3-1/2-month high, China extends winning streak

Mon May 20, 2013 4:47am EDT

* HSI +1.8 pct, H-shares +1.5 pct, CSI300 +0.7 pct

* Gains came in the highest Shanghai volume in almost two months

* China April home price data lifts property sector

* Tencent hits another record high, surpasses HK$300 mark

By Clement Tan

HONG KONG, May 20 (Reuters) - Hong Kong shares jumped to their highest since early February on Monday, led by Chinese cyclical counters, as investors chased a resurgent mainland China market on their return from a Friday holiday, which posted a fourth-straight day of gains.

The Chinese property sector was also lifted by data on Saturday that showed average new home prices rose in April at their fastest year-on-year pace in two years, albeit at a slower rate in April than in March.

The Hang Seng Index climbed 1.8 percent to 23,493 points, its highest close since Feb. 4.

The benchmark is now about 2 percent below its 2013 intra-day high of 23,944.7 on that same day, after having rebounded more than 9 percent from an April low.

The China Enterprises Index of the top Chinese listings in Hong Kong has also bounced about 9 percent from its April low, but is still some 10 percent from its February highs. The H-share index rose 1.5 percent on Monday from a two-week low.

On the mainland, the CSI300 of the leading Shanghai and Shenzhen listings rose 0.7 percent, while the Shanghai Composite Index gained 0.8 percent. With their fourth daily gain, both closed at their highest since end-March.

But while gains in Shanghai came in the strongest bourse volume since end-March, some 42 percent above its average in the last 20 days, Hong Kong turnover faded after an early morning burst as markets reopened after a public holiday last Friday.

"Investors are catching up to the big gains in other markets while Hong Kong stayed closed on Friday, but the volume driving some of today's gains were quite surprising," said Jackson Wong, Tanrich Securities' vice-president for equity sales.

Despite net flows into China-dedicated funds turning positive in the week ended May 15, Macquarie said it is too early to conclude if this constitutes a trend given the volatile flows in China exchange-traded funds in recent weeks.

While retail net redemptions intensified to $98 million from $81 million from the week before, institutional investors committed $8.5 million to China mutual funds and $254 million to China ETFs, they said in a note issued on Monday.

China property counters rose after Saturday's data, shrugging of a report in the official China Securities Journal that the country may expand a property tax trial to several cities this year that may be applied on newly purchased homes.

China Overseas Land climbed 2.8 percent, while China Resources Land jumped 3.7 percent. Both Hong Kong-listings have more than recovered from an early March wobble after the outgoing Chinese leadership announced fresh curbs on the sector.

On the mainland, investors saw the robust data as an opportunity to take some profits on the Chinese property sector, while piling into sectors likely to benefit from robust home demand such as electrical appliances.

In Shenzhen, Gree Electric surged 6.4 percent, while China Vanke, the country's largest listed developer by sales, fell 1.9 percent after closing last Friday at its highest since Feb. 5.

CHASING LAGGARD BETA PLAYS

Onshore Chinese markets had climbed sharply last Friday, triggering some short covering in Chinese coal counters in Hong Kong on Monday, traders said.

In a note last Friday, Credit Suisse analysts said a plan to restrict low-quality thermal coal imports into China is likely to be "mildly positive" to the domestic market.

Yanzhou Coal jumped 4.1 percent in Hong Kong, paring 2013 losses to 36.1 percent. China Coal climbed 3.5 percent, while China Shenhua Energy jumped 3.2 percent.

China Mengiu Diary surged 10.4 percent to its highest since December 2011 after Danone Group agreed to invest 325 million euros ($417 million) in two deals with the company, marking a comeback for the French group in China where scandals have hurt confidence in food safety.

Tencent Holdings spiked 6.3 percent to another record high, extending gains after robust quarterly earnings last Wednesday and sending its stock price above HK$300, more than the average target price of HK$290.90 among the 34 analysts that cover the stock, according to Thomson Reuters StarMine.