Shanghai shares dip below chart support, weigh on Hong Kong

Sun Nov 10, 2013 11:54pm EST

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

* Volumes weak as Communist Party plenum conclusion awaited

* China property sinks after more tightening measures

* China railway jumps, new equipment bids reportedly robust

By Clement Tan

HONG KONG, Nov 11 (Reuters) - Shanghai shares broke below a key technical support level early on Monday, weighing on Hong Kong markets, with the Chinese property sector hit by another move from a local government to tame rising home prices.

Volumes were lackluster in both markets as investors awaited the end of a four-day closed-door policy meeting of the Chinese Communist Party on Tuesday, for details on its economic agenda for the next decade.

By midday, the Hang Seng Index was up 0.1 percent at 22,772.4 points, while the China Enterprises Index of the top Chinese listings in Hong Kong crept down 0.1 percent. Both had closed last Friday at their lowest in about two weeks.

The Shanghai Composite Index slipped 0.2 percent to 2,102.8 points after earlier dipping below its 100-day moving average. The CSI300 of the leading Shanghai and Shenzhen A-share listings inched down 0.1 percent.

"There could be more losses in the A-share market from here, economic growth is still not strong enough to make a case for a meaningful return to the large caps," said Cao Xuefeng, a Chengdu-based analyst with Huaxi Securities.

Investors are also unlikely to take well to more competition for market liquidity, given recent hawkish comments from China's premier that the country cannot afford to loosen policy anymore.

About 34.3 billion yuan worth of lock-up share agreements will expire this week for Ping An Bank, Shanxi Securities and Qingdao Hanhe Cable, the official Xinhua news agency reported over the weekend.

On Monday, China Vanke shares sank 2.5 percent in Shenzhen to its lowest since June after Xinhua reported over the weekend that the Beijing city government will ban presale of new homes that cost more than 40,000 yuan per square meter by the end of the year.

This followed moves by Shanghai and Shenzhen last week to raise the minimum downpayments for second-home purchases in an attempt to quell speculative demand as home prices in first-tier Chinese cities continue to climb.

In Hong Kong, sector outperformers Country Garden and Shimao Property sank 1.9 and 2.7 percent, respectively. Shimao has fallen nearly 10 percent from a peak in October, while Country Garden has lost more than 6 percent.

There were, however, gains for the Chinese railway sector after the official China Securities Journal reported on Monday that the second round of bidding for railway equipment contracts is likely to exceed the first.

China CNR jumped 4.3 percent in Shanghai, while CSR Corp spiked 4 percent in Shanghai and 1.8 percent in Hong Kong.

Yashili surged 13.3 percent to a record high after trading in its Hong Kong shares resumed following a three-month suspension and after parent China Mengniu Dairy Co Ltd sold down shares to meet Hong Kong listing requirements.

A slew of official October economic data over the weekend came in broadly in line with expectations, although inflation climbed to an eight-month high of 3.2 percent, fanning market fears about tightening.

Market watchers also pointed to producer prices (PPI), which fell for a 20th consecutive month, as a sign of the fragile basis of China's economic recovery. PPI dropped 1.5 percent last month from a year earlier, compared with a fall of 1.3 percent the previous month.