September 6, 2012 / 9:20 AM / 5 years ago

Hong Kong, China shares eke out first gain in three days

4 Min Read

(Updates to close)

* HSI rises 0.3 pct, CSI300 climbs 0.8 pct

* Turnover weak ahead of ECB meeting and China, U.S. data

* China railway surge after reports of project approvals

* Goldman Sachs trims 3-mth Chinese index targets

By Clement Tan

HONG KONG, Sept 6 (Reuters) - Hong Kong and China shares had their first gains in three sessions on Thursday, helped by gains for infrastructure stocks after Chinese state media said the country's top planning agency approved more than $110 billion worth of railway projects.

But turnover remained lackluster ahead of the European Central Bank meeting later in the day, U.S. payrolls data on Friday and fresh China data over the weekend. Attention has turned to central banks for easing cues, with first half corporate earnings mostly out of the way.

The CSI300 Index of the top Shanghai and Shenzhen listings rose 0.8 percent from a 3-1/2-year closing low on Wednesday. The Shanghai Composite Index gained 0.7 percent.

The Hang Seng Index gained 0.3 percent to 19,209.3, returning above the 50 percent Fibonacci retracement of its rise from June lows to August highs, at about 19,440.1. It slipped below this chart level on Wednesday.

"It's fashionable to be bearish right now, but I think investors should be positioned for a short-term bounce, particularly in the mainland markets," said Hong Hao, chief strategist at Bank of Communications International Securities.

"At least one of ECB, the Fed or PBOC (People's Bank of China) will move to ease policy in some way in the near term," Hong added.

Thursday's news reports about approval of 25 rail projects that could be worth more than 700 billion yuan ($110.3 billion)bolstered the Chinese railway sector.

Investors see the sector, which has outperformed the broader market this year, as benefitting from Beijing's preferred way of bolstering growth -- by increasing infrastructure investment.

China Railway Construction soared 6.5 percent in Hong Kong and 4.2 percent in Shanghai. It is now up 49.3 percent in Hong Kong this year, compared with the Hang Seng's 4.2 percent gain and an 8.7 percent loss on the China Enterprises Index.

Beijing has cut bank reserve requirements three times since November and interest rates twice in a four-week period spanning June and July. However, it has ignored calls for further easing despite data pointing to a seventh quarter of slowing economic growth.

Policy inaction was one reason Goldman Sachs analysts trimmed their forecasts of short-term returns from Chinese equities on Thursday, following Credit Suisse earlier this week.

Goldman analysts also moved China from "overweight" to "market weight" on an Asian regional basis, trimming their three-month target for the CSI300 to 2,350, about 6 percent higher from the current 2217.8 level.

They also cut their three-month target for the China Enterprises Index of the top Chinese listings in Hong Kong to 9,100, only 0.3 percent higher than Thursday's close of 9,069.4.

Lenovo Claws Back Some Lost Ground

Shares of Lenovo Group clawed back some of Wednesday's big losses, rising 3.9 percent to HK$6.36 after the company agreed late on Wednesday to buy Brazilian electronics maker CCE, betting that Brazil's promising consumer market can counter slowing profit growth in China, its biggest market.

However, gains were capped by chart resistance at HK$6.39, the lower end of a gap that opened up when Lenovo plunged 7.6 percent on Wednesday after NEC sold its stake.

Shares of Chinese automaker Brilliance slumped 6.7 percent to HK$7.04 after its parent sold a 2.49 percent stake at HK$7.17 per share.

The Macau casino sector was broadly weaker, with Sands China shedding 3.1 percent and Wynn Macau sliding 4.7 percent. Traders said revenue from baccarat, the sector's top money spinner, was weakening. (Additional reporting by Vikram Subhedar; Editing by Richard Borsuk)

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