* HSI, HSCE -0.1 pct, CSI300 -0.4 pct
* Higher-than-expected inflation tempers China easing hopes
* Profit taking hits Chinese property shares
* China autos strong, 2013 improvement expected
By Clement Tan
HONG KONG, Jan 11 Mainland China shares reversed
gains on Friday, dragging Hong Kong into the red after December
inflation data came in higher than expected, raising concerns
that Beijing may have less leeway for monetary easing to nurse a
recovery in economic growth.
China's annual consumer inflation rate accelerated to a
seven-month high of 2.5 percent in December on rising food
prices, surpassing a 2.3 percent Reuters poll consensus --
although analysts say inflation will stay benign for 2013.
The Hang Seng Index went into the midday trading
break down 0.1 percent, with the China Enterprises Index
of the top Chinese listings in Hong Kong also slipping 0.1
percent. On the week, they are now flat and down 0.2 percent,
The CSI300 of the top Shanghai and Shenzhen
listings fell 0.4 percent, while the Shanghai Composite Index
was down 0.5 percent. On the week, they are now each
down 0.1 and 0.2 percent.
"It's not the end of the world. We have been trending in
overbought territory for more than a week anyway, so this higher
headline inflation is a trigger for some profit taking. We are
in a consolidation phase," said Hong Hao, Bank of Communication
International's chief equity strategist.
"I won't worry too much about the higher inflation data,
since much of it is down to rising food prices and extreme
winter weather. But today's data hurt some expectations for a
cut in interest rates or bank reserve requirements in the first
half of the year," Hong added.
Before the inflation data was released on Friday, the
official China Securities Journal reported that the central bank
may cut benchmark interest rates once and cut the required
reserve ratio once or twice in the first half of 2013 in a bid
to lower corporate finance costs.
Beijing will target 8.5 trillion yuan ($1.37 trillion) in
new local-currency loans in 2013 and 13 percent annual growth in
the broad money supply (M2), the same paper reported, citing
anonymous regulatory sources.
Chinese property shares, having continued last year's
strong showing, were a standout underperformer among sectors in
the onshore market, with the Shanghai property sub-index
down 2.1 percent.
Poly Real Estate shed 2.8 percent in Shanghai,
cutting gains since the start of the year to 1.3 percent. Poly
surged 63.2 percent in 2012, outperforming the 7.6 percent rise
for the CSI300.
In Hong Kong, China Resources Land, which had
jumped 8.3 percent in 2013 before Friday after surging 69
percent in 2012, slid 2.2 percent to its lowest since Dec. 31.
Smaller Chinese developers listed in Hong Kong saw bigger
percentage losses having outperformed the sector last week and
earlier this week after several of them tapped the credit market
to raise funds, improving their balance sheets without diluting
Kaisa Group and Country Garden, among
the first to tap the credit market this year, dived 4.1 and 3.8
percent on Friday.
Home prices have risen in four of the last five months
before December in the mainland. December's larger-than-expected
headline inflation stoked concerns that Beijing will enforce
more stringently existing curbs on property developers to dampen
December home prices data is expected on Jan. 18, when
monthly industrial output, urban investment, retails sales and
fourth-quarter China GDP data will also be released.
CHINA AUTOS BUCK MARKET WEAKNESS
Most of the Chinese auto sector bucked broader market
weakness. Great Wall Motor jumped 4.7
percent in Hong Kong and 3.2 percent in Shanghai.
Citing data from China Auto Market, Goldman Sachs analysts
said Chinese auto brands achieved 33.3 percent market share in
December, the highest monthly figure in 2012, helped in part by
a steady improvement in brand image and quality.
China's largest private auto manufacturer Geely Auto
rose 1.5 percent in Hong Kong after the company said
it sold a record number of cars in December. It also aimed to
sell 15 percent more cars in 2013, compared to the year before.