REFILE-China shares fall as coal producers slump, pulling Hong Kong down

Tue Dec 10, 2013 11:47pm EST

* HSI -1.2 pct, H-shares -2.3 pct, CSI300 -1.2 pct

* China coal dive, clean energy buoyed by 2014 energy plan

* Outperformers slump before end of annual planning meeting

* Everbright International spikes despite new share issuance

By Clement Tan and Alice Woodhouse

HONG KONG, Dec 11 (Reuters) - China shares sank to their lowest in more than a week early Wednesday, weighing on Hong Kong markets, as coal producers slid after the country's top economic planner said its use will be curbed to combat pollution.

Profit-taking sapped recent outperformers as investors marked time before the end of an annual economic planning meeting, which started on Tuesday and where China's leaders are expected to set 2014 economic targets and reform priorities.

While targets are usually only announced at the annual parliamentary session in March, investors expect a communiqué at the planning meeting for more signs of Beijing's reform priorities.

More November data is also due, with numbers for money supply, loan growth and total social financing expected by Dec. 15.

At midday, the Hang Seng Index fell 0.7 percent to 23,448.7 points, dipping below chart support at about 23,500. The China Enterprises Index of the top offshore Chinese listings in Hong Kong sank 2.3 percent to its lowest since Nov. 18.

Traders said losses in Hong Kong accelerated in the late morning as selling pressure spiked for index futures, which in turn triggered some callable bull contracts at about 23,500 for the Hang Seng Index.

The CSI300 of the leading Shanghai and Shenzhen A-share listings was down 1.2 percent, while the Shanghai Composite Index slid 1.1 percent. Both broke below the their range for the last week and were at their lowest since Dec. 3.

"The pressure for a downward correction has been building given that we have been stuck in the same range since Beijing unveiled reform details in mid-November," said Zhang Qi, a Shanghai-based analyst with Haitong Securities.

"Recent outperformers such as non-banking financials are coming under some profit-taking pressure, people are waiting for any possible new reform signals when the economic work meeting ends," Zhang added.

On Wednesday, one signal came from the National Development and Reform Commission.

The top economic planning agency and price regulator listed its key energy conservation initiatives for 2014, which includes reducing coal consumption and formulating a program to control its usage, according to the Securities Times.

China Shenhua Energy Co Ltd fell 3.3 percent in Hong Kong and 1.5 percent in Shanghai. China Coal Energy Co Ltd tumbled 3.7 percent in Hong Kong, to a four-week low, and fell 1.5 percent in Shanghai.

ENERGY CONSERVATION

In a conference call on Tuesday to energy conservation and reducing pollution, NDRC vice chairman Xie Zhenhua said China would promote clean energy and speed up development of hydropower, nuclear power, wind power and solar.

Huaneng Renewable climbed 2.1 percent in Hong Kong, while Hubei Energy Group, which derives nearly two-thirds of its revenue from natural gas and thermal, hydroelectric and wind power, surged 4.4 percent in Shenzhen.

China Everbright International soared 4.4 percent after issuing HK$3.66 billion ($472 million) of new shares to its controlling shareholder, raising capital to develop its environmental protection business.

China's cabinet, the State Council, announced late on Tuesday that it was removing 82 powers from a number of central government ministries, including the powerful NDRC and the Ministry of Environmental Protection, as it bids to cut red tape and prevent Beijing's army of bureaucrats from micromanaging the world's second-largest economy.

Shares of Citic Securities , China's largest listed brokerage, sank more than 3 percent in both Hong Kong and Shanghai. Its H-share listing has fallen nearly 6 percent from a Dec. 2 high.

Chinese non-banking financials are proxy plays for financial reforms in the mainland. They have broadly outperformed after Beijing's mid-November reform announcement, which was followed by others from various regulators.

China is revising its securities law and writing a futures law, the legislature said on Tuesday, as the government moves to implement ambitious financial reform goals.

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