* CSI300 +0.7 pct to seven-month high in broad-based gains
* Trading volume strongest since March 2012
* Tally on firm footing as idle money floods market-analysts
* HSI touches 18-month high, then retreats
By Gabriel Wildau
SHANGHAI, Jan 15 China shares rose to a fresh
7-1/2 month high in heavy trading on Tuesday, with gains spread
widely across sectors, as investors grew increasingly confident
that the market's recent rally has further momentum.
Hong Kong's benchmark Hang Seng Index touched an
18-month high but closed down 0.1 percent at 23,381.5 points.
The China Enterprises Index of the top Chinese listings
in Hong Kong edged up 0.03 percent.
The CSI300 index, which tracks the largest listed
firms in Shenzhen and Shanghai, rose 0.7 percent.
Analysts said the Shanghai Composite Index, which
sailed past the psychological 2,300-point barrier on Monday,
could face little resistance until 2,500. The index closed 0.6
percent higher at 2,325.7 on Tuesday.
"Money that was sitting on the sidelines has now been
persuaded that the rally is sustainable," said Zhang Weiguang,
equity analyst at Shanghai Securities.
The recent rally, which has seen the CSI300 rise by 23
percent since hitting a trough in early December, has been
fueled primarily by positive macro-economic sentiment. Data late
last week showed stronger-than-expected trade growth and healthy
credit creation, analysts say.
But analysts say new institutional money is now flooding the
mainland market as investors feel the rally is building up
steam. Trading volume on Tuesday was the highest since March
The machinery and equipment sector led the index in the
afternoon, while the financial sub-index, which had led
the recent rally, closed the day up by only 0.3 percent.
Sany Heavy Industry gained 2.9 percent, while
power transmission equipment supplier TBEA Co.
gained 10 percent.
Metals and minerals manufacturers also fared well, with
Jinduicheng Molybdenum gaining 3.3 percent.
The increased appetite for shares has also been supplemented
by money market rates that have fallen sharply since the
beginning of the year.
The benchmark weighted-average seven-day bond repurchase
rate stood at 2.81 percent on Tuesday, well below
the 3 percent mark that generally signals loose conditions.
That's down from 4.58 percent at end-December.
Also supporting the market were comments from the chairman
of China's securities regulator on Monday that quotas for
foreign investment, which currently total only about 1.5 percent
of total market capitalisation, could be raised by nine or 10
HONG KONG SHARES SLIDE
Hong Kong shares ended slightly easier on Tuesday as the
market took a breather after the stocks touched their highest
level since June 2011 following the rally in mainland markets.
"The market was consolidating, with the top side seen capped
at around 23,800 level," said Steven Leung, a director at UOB
"We don't see much pressure for a pull back in the market
with sufficient liquidity around. Investors are waiting for
fresh incentives to go into the market again," Leung said.
Investors will be looking for hints on policy direction from
the maiden policy address by the territory's new chief
executive, Leung Chun-ying, on Wednesday, brokers said. The
red-hot property market had been a particular point of interest.
Shares of China Taiping Insurance Holdings Co Ltd
rose 6.2 percent after the China's fifth-biggest mainland
insurer by market capitalisation said it was considering
acquiring an additional 25 percent stake in Taiping Life
Insurance from its parent company.
Shares of Li & Fung Ltd remained under pressure
after Moody's cut its outlook on the global supply chain
manager's credit rating to negative, and Standard & Poor's
Ratings Services put the company's "A-" Rating On CreditWatch
Negative, sending the stock to its lowest since
Li & Fung ended down 0.5 percent, after tumbling 15 percent
Investors questioned the credibility of earnings guidance
from Li & Fung after it flagged a steep profit fall just two
months after an analyst briefing.