China shares hit 2-week high as cash rates ease, lifts Hong Kong
* HSI +0.1 pct, H-shares +0.6 pct, CSI300 +2 pct
* China c.bank pledges to maintain stability in money markets
* Shanghai volumes spike as property developers lead rally
* CITIC Securities rise on fastest profit growth in 3 years
By Clement Tan
HONG KONG, Jan 22 (Reuters) - China shares touched two-week highs on Wednesday, extending a rebound that also lifted Hong Kong markets as cash rates in the mainland eased further after the Chinese central bank pledged to ensure stability in the money markets.
The People's Bank of China also said on its twitter-like Weibo account late on Tuesday that it had already provided short-term funding to small and medium-sized financial institutions, amid fears another cash squeeze was building similar to one last June and December.
By midday, the CSI300 of the largest Shanghai and Shenzhen A-share listings was up 2 percent at 2,231.87 points, its highest intra-day level since Jan. 9. It had closed on Monday at its lowest since July 9 after the benchmark seven-day repo rate soared to as high as 10 percent.
The Shanghai Composite Index climbed 1.7 percent.
The battered Chinese property sector led the rally, with China Vanke soaring more than 5 percent.
The China Enterprises Index of the leading offshore Chinese listings in Hong Kong rose 0.7 percent, while the Hang Seng Index inched up 0.1 percent.
Hong Kong turnover remained relatively lacklustre, but in Shanghai midday volumes had almost exceeded Tuesday's full day total as investors also cheered comments from Premier Li Keqiang that Beijing is confident of "stable" economic growth this year.
"The cyclicals and the blue chips are leading the rebound today, which usually point at policy relief. It's more a relief rally at this point, especially since some of these growth-sensitive counters have been hit quite badly," said Cao Xuefeng, a Chengdu-based analyst with Huaxi Securities.
Mid-sized lenders Industrial Bank rose 2.8 percent in Shanghai and Ping An bank spiked 3.7 percent in Shenzhen as China's benchmark seven-day repo rate eased by as much as 188 basis points from Tuesday's close.
The PBOC dumped 255 billion yuan ($42 billion) into the interbank market on Tuesday, its first injection since Dec. 24 and the largest amount in one day in 11 months.
Still, the official China Securities Journal warned in a front-page editorial on Tuesday the central bank's recent large injection of funds was aimed at alleviating conditions ahead of the Lunar New Year and does not suggest to a change in its tightening monetary policy position.
Gains for Vanke on Wednesday lifted its Shenzhen shares to its highest since Jan. 6. Rising home prices have raised fears of more curbs, while the tightening liquidity conditions have also stoked jitters of funding difficulties for the sector.
Poly Real Estate shares jumped 6.1 percent in Shanghai, cutting losses on the year to 3 percent after plunging nearly 40 percent in 2013. In Hong Kong, China Overseas Land climbed 2.1 percent, while Country Garden jumped 4 percent.
Deutsche Bank analysts said in a note dated Jan. 21 that such funding concerns are overdone since property sales performance remained strong during the end-June cash crunch even as short term cash rates surged to more than 11 percent.
CITIC Securities shares rose 3.9 percent in Hong Kong and 2.7 percent in Shanghai after China's largest listed brokerage posted its fastest rate of profit growth in three years in 2013, reversing a fall in 2012.
A sharp slowdown in China's economy returned to the top of investors' concerns, with more than one in three fund managers surveyed in the Bank of America-Merrill Lynch's January poll considering a China hard landing and a related collapse in commodities as the biggest tail risk, up from around one in four in December.