China shares show solid gains, lifting Hong Kong

Fri Jun 28, 2013 12:58am EDT

* HSI +1.2 pct, H-shares +0.9 pct, CSI300 +1.6 pct

* China financial, property stocks anchor rebound

* China properties jump after reports on financing relaxation

* China Resources Enterprise up on broker upgrade

By Yimou Lee and Donny Kwok

HONG KONG, June 28 (Reuters) - China shares had solid gains and helped buoy Hong Kong on Friday, led by a strong rebound in financials and properties as worries on China's cash crunch eased.

The People's Bank of China said on Friday it will guide financial institutions to maintain reasonable lending policies, which reduced market concerns as investors covered short positions ahead of the half-year.

At midday, the Shanghai Composite Index was up .8 percent at 1,965.27 points, while the CSI300 rose 1.6 percent. If these hold, Friday will produce the biggest daily percentage gains for both indexes since May 28.

As of midday, both indexes were down 5.2 percent for the week.

The Hang Seng Index rose 1.2 percent at 20,678.6 points, while the China Enterprises Index of the top Chinese listings in Hong Kong gained 0.9 percent. On the week, they were up 2.1 and 0.1 percent, respectively.

"Overall sentiment kept improving and investors were more willing to jump into the stocks as the Chinese markets had been stabilized," said Alfred Chan, chief dealer at Hong Kong-based Cheer Pearl Investment.

"We don't expect any new measure (to tighten liquidity) from China in the short run... But too much upside is unlikely after the recent rebound while investors were selective in taking long positions," Chan said.

On Friday, China's central bank chief Zhou Xiaochuan told a financial forum in Shanghai that it will ensure reasonable lending growth and will adjust market liquidity in an appropriate manner.

In China, the one-week cash rate fell on Friday morning to its lowest since before last week's sharp credit squeeze.

China's rebound was led by smaller banks, which are more reliant on short-term interbank funding and were badly hit during the past week.

China Minsheng Bank, which had big recent losses, was up 2.3 percent in Shanghai, while Everbright Bank rose 2.2 percent.

The country's two largest lenders, Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB) climbed 0.8 and 1 percent, respectively.

PROPERTY STOCKS JUMP

Chinese property stocks jumped on mainland media reports about relaxation of financing for mainland property companies. Officials in China Securities Regulatory Commission declined to comment on the reports.

The sector was also boosted after a Shenzhen area development agency said on Thursday it would invest 389.8 billion yuan ($63.39 billion) before the end of 2015 in developing comprehensive infrastructure in the region.

On the mainland, China Vanke surged 8.7 percent, set for its best daily showing since Jan. 21, while Poly Real Estate jumped 6.8 percent and headed for its best day since September 2012.

In Hong Kong, China Overseas Land and Investment Ltd rose 4.3 percent, while China Resources Land gained 3 percent.

Shares of conglomerate China Resources Enterprise rose 3.6 percent to HK$24.35 after broker BOC International upgraded the stock to buy from hold and raised its price target to HK$25.90 from HK$23.50.