China stocks rise on reports of pilot programme, Hong Kong up too

Thu Mar 13, 2014 1:05am EDT

* HSI +0.5 pct, H-shares +1.4 pct, CSI300 +1.4 pct

* China banks boosted by reports on preferred share pilot

* Country Garden falls 6.5 percent on broker downgrade

By Alice Woodhouse and Chen Yixin

HONG KONG/SHANGHAI, March 13 (Reuters) - Chinese stocks rose on Thursday, pulling up Hong Kong's market, led by banking counters that could be the first ones joining an anticipated preferred shares pilot programme in the mainland.

Three sources with knowledge of the plans told Reuters that the China Securities Regulatory Commission is ready to launch the long-awaited pilot programme allowing listed companies to issue preferred shares, and could announce it as policy as soon as this weekend.

At midday, the Hang Seng Index was up 0.5 percent at 21,999.79 points. The China Enterprises Index of the top Chinese listings in Hong Kong rose 1.4 percent.

The CSI300 of the largest Shanghai and Shenzhen A-share listings also climbed 1.4 percent, while the Shanghai Composite Index moved above 2,000 points by rising 1.3 percent to 2,022.96 points.

In Hong Kong, shares saw "just a slight recovery from their low," said Alex Wong, a director at Ample Finance Group. "Preferred shares can only solve a little bit of capital worry but it cannot solve the worries such as debt quality and interest margin (among Chinese banks) in the long run."

Wong said that as the overall outlook is still bearish, market sentiment improved a little on improved liquidity. He said resource, energy and bank stocks should rise if Chinese data due this afternoon is solid.

Data due at 0530 GMT includes industrial output, urban investment and retail sales.

Index compiler MSCI said on Wednesday it plans to include China's mainland-based A shares in its benchmark emerging market index from May 2015, as the country gradually opens up its domestic yuan markets to foreign investors.

Almost all banking shares rose. Shanghai Pudong Development Bank Co Ltd jumped 4.1 percent and Agriculture Bank of China Co Ltd added 3.5 percent in Shanghai and 1.9 percent in Hong Kong on the preferred shares pilot reports.

On Thursday, China Construction Bank Corp's Hong Kong-listed shares gained 1.8 percent after hitting a 9-month low the previous trading session. Its Shanghai-listed shares rose 2.1 percent.

Property developer Country Garden Holdings Co Ltd fell 6.5 percent after UBS downgraded it to neutral from buy because of lower gross margins and higher operating expenses.

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