* HSI -0.8 pct, H-shares -1.1 pct, CSI300 +0.8 pct
* Last week's record fund drain in China not easing:
* Risk off in HK as hung Italian parliament stokes debt
* Smaller Chinese banks lead as A shares outshine Asia
By Clement Tan
HONG KONG, Feb 26 Hong Kong shares tested a new
2013 low in weak Tuesday trade, shrugging off strength in the
mainland Chinese market with financials leading index losses
after a messy outcome in the Italian elections turned investors
wary to risk.
Mainland China shares outperformed Asian peers after
official media dispelled tightening fears as the central bank
moved to drain a record 910 billion yuan ($145.98 billion) from
the banking system last week.
The Hang Seng Index went into the midday break down
0.8 percent at 22,645.2, after earlier touching its lowest 2013
intra-day level. It has now fallen almost 5 percent from a Jan.
30 peak and down 0.1 percent this year to date.
The China Enterprises Index of the top Chinese
listings in Hong Kong shed 1.1 percent as midday turnover neared
this year's lows after election results showed no party won
enough votes to form a new Italian government, raising fears of
renewed debt problems in Europe.
Short selling in Hong Kong accounted for more than 10
percent of total turnover, above the historical 8 percent
average, traders said.
The CSI300 of the top Shanghai and Shenzhen
A-share listings climbed 0.8 percent, while the Shanghai
Composite Index rose 0.4 percent. If gains are held,
this will be their second-straight gain after steep losses last
"This is not a good entry point for those who have missed
the rally at the start of the year," said Hong Hao, Bank of
Communication International's chief strategist.
He added that uncertainties relating to the Italian
election, the continuation of U.S. quantitative easing and
Japan's new central bank governor will likely rise in the coming
weeks and could roil markets.
"Expectations for the upcoming parliamentary meetings in
China are also too high. The meetings next week will be about
the big picture, longer-term goals and specific details are
highly unlikely," Hong said.
The annual Chinese People's Political Consultative
Conference and National People's Congress, where Xi Jinping is
expected to be confirmed as China's new president, will start in
Beijing on March 3 and 5, respectively.
On Tuesday, railway counters slid after the Guangzhou-based
21st Century Business Herald newspaper reported that a plan to
merge China's ministry of railways with the communications
ministry has been submitted for consideration at the second
plenary meeting of the 18th Communist Party of China's Central
Committee for review this week.
Daqin Railway dived 3.7 percent in Shanghai,
while China Railway Construction shed 2.1
percent in Shanghai and 2.7 percent in Hong Kong.
Shares of HSBC Holdings, Europe's largest bank,
shed 0.9 percent and was the top drag on the Hang Seng Index.
China Construction Bank (CCB) shed 1.3 percent to its
lowest this year in Hong Kong.
Premium alcohol producers Kweichow Moutai slid
1.5 percent in Shanghai, while smaller rival Wuliangye
lost 1.4 percent in Shenzhen after the official
Xinhua news agency said the government planned to toughen
anti-corruption rules. The liquors are popularly given away as
NO CHINA EASING, YET
Smaller banks led the rise in the A-share market, with China
Minsheng Bank jumping 4.6 percent in Shanghai and
Ping An Bank surging 9.2 percent in Shenzhen after
local media reported that both stopped mortgage lending in
Gains so far came in the best midday Shanghai bourse volumes
in a week as the People's Bank of China drained a significantly
smaller 5 billion yuan ($802.07 million) from the money markets
through 28-day bond repurchase agreements on Tuesday.
The official Shanghai Securities News reported on Tuesday
that the suspension of fund injections by the central bank this
week does not mean China will tighten monetary policy as the
economic recovery is not solid.
In a report on Tuesday, CICC said last week's move was in
response to the ultra-loose money supply conditions before the
Lunar New Year, but the draining of funds was a warning against
the high growth of total social financing in January.