* HSI flat, H-shares -0.7 pct, CSI300 -1.0 pct
* 1st use of 14-day forward repo in 8 months spooks
* Fosun Pharmaceutical spikes after Chindex deal
* Agriculture outperforms, state media spurs policy hopes
By Clement Tan
HONG KONG, Feb 18 Shanghai shares fell from a
two-month high early on Tuesday, weighing on Hong Kong stocks,
after China's central bank drained 48 billion yuan ($7.92
billion) from the country's money market.
This comes as cash rates fell after official data on
Saturday showed China's banks issued the biggest amount of loans
in a single month in four years. The People's Bank of China
(PBOC) had drained 450 billion yuan last week as it continued to
taper a pre-Lunar New Year cash injection.
At midday, the Shanghai Composite Index was down 0.5
percent at 2,125 points after having closed on Monday at its
highest since Dec. 18. The CSI300 of the largest
Shanghai and Shenzhen A-share listings sank 1 percent.
The Hang Seng Index was flat, while the China
Enterprises Index of the leading offshore Chinese
listings in Hong Kong shed 0.7 percent. Both had finished Monday
at their highest closing levels in about three weeks.
"The PBOC draining of funds today is a reason for the weak
market, but it's more an adjustment of liquidity after the Lunar
New Year," said Cao Xuefeng, a Huaxi Securities analyst based in
Chengdu.. "I don't think anybody is taking this as a sign of
that the central bank is tightening policy."
Chinese banks were among the leading index drags after the
PBOC used 14-day forward bond repurchase agreements for the
first time in eight months to withdraw cash from the market.
Mid-sized China Citic Bank tumbled 3.7
percent in Shanghai and 0.5 percent in Hong Kong despite
trumping expectations with a 26.2 percent rise in preliminary
The central bank has been trying to engineer a gradual
upward shift in the cost of money in order to encourage Chinese
firms to deleverage and to discourage high-risk shadow banking
Chinese insurers extended their outperformance this week
after another reported robust January premium income growth. New
China Life Insurance's H-share listing climbed 2.7
percent after reporting a 131 percent spike from a year earlier.
Shanghai Fosun Pharmaceutical Group
jumped more than 4 percent in both Shanghai and Hong Kong after
the company became the largest shareholder in Chindex
International Inc. Fosun and private equity firm TPG
said they will take the hospital operator private in a $369
Agriculture-related counters outperformed, buoyed by a
report in the official China Securities Journal that land
reforms will take the policy centre-stage at the annual
parliamentary meeting which opens on March 3.
Heilongjiang Agriculture jumped 5.1 percent in
Shanghai. First Tractor rose 1.2 percent in
Shanghai but slipped 0.6 percent in Hong Kong.
Hong Kong lender Bank of East Asia spiked 3.8
percent ahead of its earnings later in the day.
BEA, still down nearly 4 percent this year after an 11
percent rise in 2013, is trading at 11.6 times forward 12-month
earnings, a 19 percent premium to its historical median,
according to Thomson Reuters StarMine.