* HSI -0.7 pct, H-shares -1.5 pct, CSI300 -1.5 pct
* China property sector sinks as property tax expansion
* New China Life Insurance slides after Zurich's H-share
* Goldman Sachs upgrades China H-shares to overweight on
By Clement Tan
HONG KONG, Nov 21 A survey pointing to a
weaker-than-expected pace of growth in Chinese manufacturing
activity knocked Hong Kong shares off a 10-month high early on
Thursday, with markets in the mainland also down as investors
took profit on recent outperformers.
The Chinese property sector was a key drag after the State
Council approved the establishment of a unified property
registration system, setting the stage for a nationwide
expansion of a property tax trial.
By midday, the Hang Seng Index, which closed on
Wednesday at its highest since early February, was down 0.7
percent at 23,545 points. The China Enterprises Index of
the top Chinese listings in Hong Kong sank 1.5 percent.
The CSI300 of the leading Shanghai and Shenzhen
A-share listings slid 1.5 percent, while the Shanghai Composite
Index shed 1.1 percent. If losses persist, this would be
their second loss in three days.
"It's pretty well known that China's economy is slowing
down, but the flash PMI was a bit weaker than expected so it was
a factor for the correction today," said Larry Jiang, chief
strategist at Guotai Junan International Securities.
The HSBC flash purchasing managers' index (PMI) came in at
50.4 in November from October's 50.9 final reading -- its first
month-on-month drop in the pace of growth in four months --
checking gains from earlier this week as investors cheered
China's ambitious reform agenda.
"But we now know the broader direction that the government
is working towards and it should spur a re-rating of the Chinese
equity market in 2014," Jiang added, suggesting some investors
could buy reform beneficiaries on share price weakness.
Goldman Sachs' Asia equity strategists on Thursday raised
their rating on Chinese equities from market weight to
overweight, adding to the chorus of investors cheering China's
ambitious reform agenda this week after UBS had done the same on
On Thursday, though, financial counters that led the rally
in the previous four sessions were among the biggest losers.
Losses came as cash rates rose despite the Chinese central bank
conducting its biggest weekly cash injection this week since
New China Life Insurance dived 3 percent in Hong
Kong after Zurich Insurance sold its remaining stake
at HK$25 per share, representing a 7.7 percent discount to its
Wednesday closing price.
Shanghai Jahwa tumbled 6 percent in Shanghai
after the cosmetics maker said it was being investigated by the
country's securities regulator for disclosure-related issues.
Child skincare products maker Prince Frog International
Holdings Ltd plunged 23 percent at the resumption of
trade following a month-long suspension after it rejected a
short-seller report that took issue with its sales data, saying
it was misleading.
REFORMS, REFORMS, REFORMS
Chinese property developers China Vanke fell 3.4
percent in Shenzhen and Poly Real Estate eased 3.3
percent in Shanghai. China Resources Land fell 1.4
percent and Country Garden lost nearly 2 percent in
Finance Minister Lou Jiwei said in an interview with the
official People's Daily that the government will improve the
income tax regime and reiterated that it will speed up
legislation of property tax and reform.
The official China Securities Journal further aggravated
sentiment on the property sector after it reported on Thursday
that Beijing may use a higher tax rate in its property tax
trial, while "significantly" expanding the range of residence
properties that qualify for tax.
But there were gains for ZTE Corp which
rose 1.2 percent in Hong Kong and 1.4 percent in Shenzhen on
hopes it would benefit from greater capital expenditure by
mobile operators after online media speculated that authorities
may issue 4G licenses as soon as next week.
Suning Commerce Group climbed 3.3 percent in
Shenzhen after the commerce ministry said growth in total online
commerce should hit 18 trillion yuan by 2015 and account for
more than 10 percent of all consumer retail spending.