China main share index jumps to 7-month high, Hong Kong climbs too

Mon Jul 28, 2014 1:13am EDT

* HSI +0.9 pct, H-shares +1.0 pct, CSI300 +2.5 pct

* BoCom leads bank gains on plans to seek more private investors

* Hong Yuan Securities surges after trade resumes

* HKEx at 3-year high after report on launch date for stock connect (Updates to midday)

By Grace Li

HONG KONG, July 28 (Reuters) - China shares jumped to their highest since December on Monday, as banks surged after a Reuters report said the country's fifth-biggest bank by assets planned to seek more private investors, while Hong Kong markets were also pushed higher.

By midday, the Hang Seng Index was up 0.9 percent at 24,437.54 points. The China Enterprises Index of the top Chinese listings in Hong Kong rose 1.0 percent.

The CSI300 of the leading Shanghai and Shenzhen A-share listings jumped 2.5 percent, while the Shanghai Composite Index gained 2.1 percent to 2,170.69 points.

The Shanghai benchmark index earlier tested its highest since mid-December, while the CSI300 was just off the year's high.

China's Bank of Communications Co Ltd (BoCom) plans to sell stakes to private investors under a government reform aimed at letting private capital play a bigger role in the economy, two people familiar with the matter told Reuters on Friday.

BoCom jumped 9.4 percent in Shanghai, its biggest daily gain since September 2013. Its Hong Kong listing was the top percentage gainer on the Hang Seng, climbing 4.4 percent to an almost 8-month high.

"The impending plan is likely to change the previous structure. It will allow non-state capital to enter the management levels," said Chen Xingyu, an analyst from the Shanghai branch of Phillip Securities (Hong Kong) Limited.

"When it's changing structure, investors are also anticipating details of the stock incentive plans which will be introduced at the management level," said Chen, who added such a change would link management's dividends and salaries far more closely to the banks' development, which will boost efficiency at state banks.

The Shanghai financials sub-index added 3.9 percent, its biggest rise in fourth months.

Hong Kong and Shanghai listings of China's "big four" banks all rose between 1 and 3.5 percent.

Hong Yuan Securities soared the maximum allowed 10 percent after trade resumed on Monday. The firm said late on Friday its management had agreed to be bought by Shenyin & Wanguo Securities for 39.6 billion yuan ($6.40 billion), creating China's third-biggest brokerage.

Shares of brokerage firms were also bolstered by a National Business Daily report, which said the launch date for the Hong Kong-Shanghai Stock Connect scheme has been set for Oct. 13.

The mainland's two largest-listed names in the sector - CITIC Securities and Haitong Securities - both spiked more than 4 percent.

The news also lifted shares of Hong Kong Exchanges and Clearing, which leapt 3.2 percent to a three-year high.

($1 = 6.1860 Chinese yuan) (Additional reporting by Engen Tham in Shanghai; Editing by Jacqueline Wong)