Hong Kong shares hit multi-week highs, China slips

Thu Sep 5, 2013 12:27am EDT

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* HSI +1.2 pct, H-shares +1.3 pct, CSI300 -0.1 pct

* China shippers jump, Baltic Dry Index at highest since Jan 2012

* Merchants Bank climb after successful Shanghai rights issue

* Sunac China bucks mainland property sector strength

By Clement Tan

HONG KONG, Sept 5 (Reuters) - Hong Kong shares rose to a three-week high in early Thursday trade with the Chinese shipping sector leading strong gains in cyclical sectors as a measure of freight cost surged to its highest in nearly two years.

Investors also cheered China Merchants Bank's completion of a long-planned share offering that raised 27.5 billion yuan ($4.49 billion), lifting its share price, along with those of its Chinese banking rivals.

But the broader mainland China market underperformed Asian peers. At midday, the Shanghai Composite Index and CSI300 of the leading Shanghai and Shenzhen A-share listings each slipped 0.1 percent.

The Hang Seng Index rose 1.2 percent to 22,600.4 points after earlier touching its highest intra-day level since Aug. 16. The China Enterprises Index of the top Chinese listings in Hong Kong climbed 1.3 percent.

Both indexes have jumped 5 and 6 percent, respectively, from Aug. 28 lows, although the H-share index is still down more than 9 percent on the year. The Hang Seng benchmark is almost flat for the year, down 0.3 percent.

With optimism on China's growth outlook returning after a slew of favourable economic data, some market watchers expect funds that have exited other parts of emerging Asia may begin to trickle back into the offshore Chinese markets.

"The market is taking Merchants Bank's successful share issue as a positive because of the high take up rate by its current Shanghai shareholders," said Linus Yip, a strategist with First Shanghai Securities.

"It's a sign that the tone on China has changed for the better that investors are not too bothered about stake dilution, probably also because the targetted subscribers are current stakeholders," Yip added.

China Merchants Bank shares climbed 2.6 percent in Shanghai as trading resumed for the first time since Aug. 27. Its H-share listing climbed 2.2 percent to its highest since June 3.

Its rights offer made up the bulk of a broader $5.7 billion fundraising plan by the bank that includes a HK$7.9 billion ($1.04 billion) share sale in Hong Kong, making the combined plan the world's second-largest equity offering this year.

Result for its Hong Kong sale will be disclosed on Sept. 26, the bank said in a filing to the Hong Kong exchange.

Chinese shippers were among the bigger percentage risers on the day after the Baltic Dry Index soared to its highest since January 2012. China Shipping Development surged 7.9 percent, while China Cosco spiked 6.1 percent.

The sector has also been recently boosted by the approval of a free-trade zone in Shanghai, with hopes high that Beijing will approve more such zones as the central government forges ahead with its plans to restructure the world's second-largest economy.

Chinese property developers were mostly higher after the official Shanghai Securities News reported that the China Securities Regulatory Commission will issue new rules on refinancing for property developers in the next two to three weeks, citing unidentified sources.

China Vanke rose 1.7 percent in Shenzhen. The country's largest developer by sales was also helped by positive sales in August that reached 15.3 billion yuan ($2.50 billion), up 9.4 percent from a month ago.

But Sunac China tumbled 4.4 percent after Hong Kong media reported that the company won the tender for a Beijing site for a record 73,099 yuan per buildable square metre, a high price which suggested the plot would be profitable only if future homes are sold for as much as 150,000 yuan per square metre.

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