* HSI flat on the day, jumps 22.9 pct in 2012
* CSI300 up 1.7 pct on Monday, up 7.6 in 2012
* Chinese insurers, brokers up, CSRC mutual funds ruling
* A-H premium nears 100 parity after A-share Dec
By Clement Tan
HONG KONG, Dec 31 Mainland Chinese shares
climbed to a six-month closing high on Monday, helping Hong Kong
cut early losses as the onshore market closed out a first annual
gain in three years helped by strength in brokerages and
Investors cheered a plan by the China Securities Regulatory
Commission to allow eligible securities houses and insurers'
asset management units to develop and manage mutual funds in its
latest bid to revitalize the sector.
The Hang Seng Index closed flat at 22,656.9, hovering
at its highest close since July 2011. Stiff chart resistance is
next seen at around 22,800, intra-day highs last seen in July
and August 2011. The benchmark jumped 22.9 percent in 2012.
The China Enterprises Index of the top Chinese
listings in Hong Kong climbed 0.5 percent on the day and 15.1
percent in 2012. Hong Kong markets shut at midday for the New
Year holiday and will resume trading on Wednesday.
The CSI300 of the top Shanghai and Shenzhen
listings rose 1.7 percent on the day and 7.6 percent in 2012.
The Shanghai Composite Index gained 1.6 percent on
Monday and 3.2 percent this year.
This was the first annual gain in three years for the two
onshore indexes and the H-share index, and the best year since
2009 for all four benchmarks. Mainland markets are closed for a
three-day holiday and resume trading on Friday.
"Investors rotated into Chinese non-bank financial stocks
from banking ones today in Hong Kong," said Jackson Wong,
vice-president of equity sales at Tanrich Securities.
"Financial reform is a very strong theme and will carry into
2013, but cyclical counters with low valuations will probably
lead a rally in the early weeks," said Jackson Wong,
vice-president of Tanrich Securities
On Monday, China Life Insurance was the
biggest boost to indexes in Hong Kong and China, jumping 5.8
percent to a 20-month high in Shanghai, bringing its 2012 gains
to 21.3 percent.
China Life shares climbed 3.1 percent to their highest since
August 2011 in Hong Kong, rising 32 percent in 2012. Smaller
rival, Ping An Insurance rose 1.9 percent
in Hong Kong and 3.4 percent in Shanghai.
The announcement by the China Securities Regulatory
Commission was its latest bid to reinvigorate an industry
struggling to produce returns for investors and introduce more
competition in an already-crowded mutual funds sector.
This follows an announcement last week allowing brokerages
to sell subordinated debt and the Chinese central bank pledging
to quicken the pace of reforming the financial sector that sent
shares of Chinese brokerages soaring last Friday.
Shares of Citic Securities , China's
largest listed brokerage, on Monday added a further 2.2 percent
in Hong Kong and 1.5 percent in Shanghai. It finished 2012 up 53
percent in Hong Kong and 38 percent in Shanghai.
Tian Di Science & Technology, among 15 stocks
added to the CSI300 with effect from Friday, rose 3.1 percent in
Shanghai. Datang International Power Generation,
among the 15 excluded, slipped 0.3 percent in Shanghai.
EARLY 2012 CYCLICAL RALLY TO REPEAT IN '13?
Despite outshining onshore peers in 2012, offshore Chinese
shares finished 2012 way off the highest levels this year,
mainly due to the underperformance of some growth-sensitive
metal producer counters, which were plagued by inventory-related
Chinese property-to-steel conglomerate Citic Pacific
finished 2012 down 17.4 percent after rising by as
much as 13.3 percent on the year in February.
Currently trading at a 27 percent discount to its forward
12-month earnings multiple, according to Thomson Reuters
StarMine, Citic could see a repeat of its early 2012 rally as
investors look to laggard cyclicals in early 2013, particularly
if Chinese economic data come in better than expected.
On Monday, Hong Kong shares cut early losses while onshore
Chinese markets extended gains after a survey of private factory
managers showed activity in China's manufacturing sector hit its
fastest pace in December since May 2011.
An improving Chinese economy, along with signs that large
institutional investors were returning to the A-share market
after several market-boosting measures, has helped onshore
markets outperform offshore peers in December.
Chinese fund managers raised their recommended equity
weightings in December to a seven-month high with a strong
preference toward financial stocks as an improved economic
outlook and market performance boosted risk appetite, the latest
Reuters fund poll showed.
The CSI300 and Shanghai Composite closed on Monday at their
highest since June 20, largely on the back of a surge in
December. They soared 17.9 and 14.6 percent this month, their
respective best monthly gains since July 2009.
That has helped the Hang Seng Index A/H premium index
creep back towards the 100 parity level, closing at
99.4 on Monday, after dipping below that level in late October,
wiping out the premium that onshore shares has historically
traded over offshore peers.