* HSI +1.1 pct, H-shares +2 pct, CSI300 +0.4 pct
* China finance and insurance strong on preferred share
* Hong Kong at one-week high on short-covering
* Hutchison falls on Temasek deal
(Updates to midday)
By Alice Woodhouse and Natalie Thomas
HONG KONG/SHANGHAI, March 24 Shares in Hong Kong
and China shares rose on Monday as a weak factory survey
heightened expectations that Beijing will have to unveil
stimulus measures soon to avert a sharper downturn in the
world's second-largest economy.
China's factory activity contacted for the third month in a
row in March, falling to an eight-month low of 48.1 from
February's final reading of 48.5, the flash Markit/HSBC
Purchasing Managers' index showed.
By midday, the Hang Seng Index was up 1.1 percent at
21,673.21 points, its highest since March 13. The China
Enterprises Index of the top Chinese listings in Hong
Kong rose 2 percent to its highest since March 7.
The CSI300 of the leading Shanghai and Shenzhen
A-share listings rose 0.4 percent, while the Shanghai Composite
Index was up 0.5 percent at 2,057.70 points.
"It (the flash PMI) was another bad sign the Chinese economy
is softening. It was pretty much expected, so a lot of investors
are looking for the Chinese government to roll out some
meaningful stimulus on infrastructure or urbanisation themes,"
said Jackson Wong of Tanrich Securities in Hong Kong.
Market sentiment was also buoyed by expectations that
Beijing will soon allow big firms such as banks to sell
preferred shares to raise capital, averting a potential deluge
of sales of common stock which would dilute valuations.
China's securities regulator announced rules for a pilot
programme allowing listed companies to issue preferred shares
after the market close on Friday. Analysts have widely predicted
banks will be the first to issue preferred shares in the trial.
"The market has carried over Friday's momentum because the
Chinese authorities approved the top 50 companies to issue
preferred shares. That's very good news for a lot of companies,
especially for banks, because they can immediately refuel some
of their capital and liquidity needs," Wong said.
Finance and insurance sectors saw the biggest gains in
mainland markets, with Industrial and Commercial Bank of China
and Minsheng Bank posting gains of 1.2
percent and 1.1 percent, respectively.
Investors are awaiting earnings from Chinese banks such as
Agricultural Bank of China and China Construction Bank
later this week.
Ports-to-telecoms conglomerate Hutchison Whampoa
fell 4.7 percent after it announced Singapore state investor
Temasek holdings agreed to buy a 24.9 percent stake in its
retail business A.S. Watson for about HK$44 billion ($5.7
($1 = 7.7588 Hong Kong Dollars)
(Editing by Kim Coghill)