China shares underperform Asia ahead of party plenum, Hong Kong dragged down

Thu Nov 7, 2013 11:57pm EST

* HSI -0.6 pct, H-shares -0.8 pct, CSI300 -1.2 pct

* All four indexes set for weekly loss, financials big drags

* China COSCO dive, VP reportedly under investigation

* Esprit hits 20-mth high on hopes for more mgt stake increase

By Clement Tan

HONG KONG, Nov 8 (Reuters) - China shares underperformed most Asian markets on Friday morning, taking Hong Kong down to a two-week low, as growth-sensitive counters were hit ahead of a key Communist Party policy-setting meeting starting this weekend.

Losses came in anemic bourse volumes, with both markets headed for weekly losses and little moved by China's October trade data on Friday. Monthly figures for inflation, industrial output, urban investment and retail sales are due on Saturday.

By midday, the CSI300 of the top Shanghai and Shenzhen listings sank 1.2 percent to 2,312.6 points, breaking below its 100-day moving average for the first time since Sept. 9. The Shanghai Composite Index slid 1.1 percent.

The Hang Seng Index shed 0.6 percent to 22,746.5 points after opening at its lowest intra-day level since Oct. 25. The China Enterprises Index of the top Chinese listings in Hong Kong sank 0.8 percent.

The manager for both Hong Kong benchmarks is due to release the results of its quarterly component review after markets close on Friday.

All four benchmark indexes are set for weekly losses. China's Third Plenum will see some of the country's top leaders gather behind closed doors from Nov. 9-12 to set the economic agenda for the next decade.

"I think you can see that institutional investors are cautious from their mostly neutral or negative positioning," said Kelvin Wong, Hong Kong-China equity analyst at Julius Baer.

While there are opportunities in sectors that give better earnings clarity, it is too risky to place bets because the plenum meeting is only likely to produce broad directional policy guidance, Wong added.

"This new Chinese government is only a year old, details on changes will take a longer time to emerge," Wong said.

On Friday, shares of China COSCO Holdings tumbled 5.3 percent in Hong Kong and 3.5 percent in Shanghai after the country's largest bulk shipper said a vice president was under investigation by the relevant authorities -- shorthand generally used in China to describe corruption probes.

Chinese financials weakened again after several headlines in local Chinese media earlier this week stoked expectations that Beijing will do more to crack down on shadow banking after this weekend.

Haitong Securities , China's second-largest listed brokerage, tumbled 5 percent in Shanghai and 2 percent in Hong Kong after Chinese media reported that its returns on some of its bond market products declined significantly in October.

China exports in October increased by 5.6 percent from a year earlier, the Customs Administration said on Friday, beating market expectations for a 3.2 percent rise. Imports rose 7.6 percent against forecasts for an 8.5 percent rise, leaving the trade surplus at $31.1 billion.

There were gains for some companies in sectors seen firmly part of Beijing's policy focus such as environmental management. China Everbright International rose 0.5 percent, while Beijing Enterprise Water climbed 0.8 percent.

Esprit Holdings spiked 5.2 percent to a 20-month high, driven largely by retail investors on hopes that management will further increase their stakes. Hong Kong media reported on Thursday that its chairman and vice-chairman had raised their stakes.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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