Hong Kong, China shares stay sluggish, Sinopec climbs on reform hopes
* HSI +0.2 pct, H-shares -0.1 pct, CSI300 flat
* Bruised Chinese property developers get some respite
* Media report lifts Sinopec, hope for state-enterprise reform
* BYD soars on Tesla surge, Beijing plan to aid electric cars
By Clement Tan
HONG KONG, Feb 26 (Reuters) - Hong Kong and China shares were sluggish early on Wednesday as the yuan again fell below the official fix, adding to jitters about possible policy changes at next week's annual parliamentary meetings.
But a media report that the meetings starting March 5 could unveil more reforms at China Petroleum and Chemical Corp (Sinopec) pushed up its stock price.
At midday, the Hang Seng Index inched up 0.2 percent to 22,358.9 points, while the China Enterprises Index of the leading offshore Chinese listings in Hong Kong slipped 0.1 percent. They have held up better this week, compared to onshore markets, down about 1 and 2 percent, respectively.
The CSI300 of the biggest Shanghai and Shenzhen A-share listings was flat, while the Shanghai Composite Index inched up 0.1 percent. They are down 4.7 and 3.6 percent this week on fears that banks have stopped extending credit to property developers and that property prices are declining.
"It's all tied to credit tightening by the PBOC (People's Bank of China) and a slowing economy. Banks are now left with less money to work with, so they are forced to reassess low yielding and high-risk businesses," said Francis Cheung, CLSA's Hong Kong-China strategist.
The Southern Metropolis Daily reported on Wednesday that some banks in Guangzhou and Shenzhen have raised mortgage lending rates by 10 to 20 percent.
"Some value is beginning to emerge now in the Chinese property, energy and insurance sectors, but it's still too early to return to the market," Cheung added, suggesting he would wait for a clear easing signal from the PBOC.
China's yuan weakened below the daily fixing for a second consecutive day on Wednesday after the central bank set the lowest midpoint in more than two months, in a sign authorities are determined to stamp out speculative bets in the currency.
In a report dated Feb. 25, Cheung said if Beijing next week sets the GDP target for 2014 at 7.5 percent, there is a "real risk" that it may not be met, forcing the central bank to loosen policy as early as the first half of the year.
On Wednesday, there was some respite for bruised Chinese property developers. The sector accounted for the bulk of the most highly-shorted counters in Hong Kong the two previous days.
China Vanke slipped another 0.3 percent in Shenzhen and is now down 8.5 percent this week to its lowest in more than five years. Poly Real Estate inched up 0.6 percent in Shanghai, limiting losses on the Shanghai property sub-index, down 0.6 percent at its lowest since June.
In Hong Kong, China Resources Land sank 0.7 percent and China Overseas Land inched up 0.5 percent.
PROPERTY COOLING SIGNS
The official China Daily newspaper said in an editorial on Wednesday that Chinese policymakers must ensure the property market, which has started to show signs of cooling, does not become a source of social and financial instability.
Shares of Sinopec soared 3 percent in Hong Kong and 2.5 percent in Shanghai after China Business News reported its chairman Fu Chengyu said the company will soon announce the next stages of its reform plan.
Sinopec last week announced plans to sell up to 30 percent of its retail oil business to private investors, seen as the first signs of reform at a state-owned enterprise.
Warren Buffett-backed Chinese automaker BYD Co spiked 6.4 percent in Hong Kong and 9.3 percent in Shenzhen, helped by a 30.4 percent surge for the shares of Tesla Motor and plans by the Beijing city government to build 1,000 quick-charging poles for electric vehicles this year.
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