China shares tepid despite flash PMI showing factory expansion

HONG KONG, June 23 Mon Jun 23, 2014 3:06am EDT

HONG KONG, June 23 (Reuters) - China shares edged down on Monday even though a preliminary survey showed activity in China's factory sector in June expanded for the first time in six months, a new sign the economy is stabilising.

But a liquidity squeeze resulting from new initial public offerings (IPOs) continued to weigh on the markets. The squeeze is not expected to improve before the end of the month.

The Shanghai Composite Index closed down 0.1 percent at 2,024.37 points. The CSI300 of the leading Shanghai and Shenzhen A-share listings also slipped 0.1 percent.

Shares of medical equipment companies were stronger on hopes of more state support for the sector. Guangdong Biolight Meditech jumped 9.3 percent.

The Nasdaq-style ChiNext Composite Index of mostly high-tech startups listed in Shenzhen advanced 2.2 percent, following Friday's rise of 1.4 percent.

The two-day gain helped the index recover from a 3.3 percent drop on Thursday.

The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index rose to 50.8 in June from May's final reading of 49.4, moving above the 50-point level that separates growth in activity from contraction. (Reporting by Grace Li; Editing by Richard Borsuk)