China, Hong Kong shares take wing on PMI data

* HK shares hit 8-month high, China stocks at 10-month high

* China PMI data drives up resources, industrials

* Chinese insurers vault on stock market rally

(Updates to close)

By Parvathy Ullatil and Claire Zhang

HONG KONG, June 1 (Reuters) - China and Hong Kong stocks rose in tandem on Monday as investors cheered better-than-expected data from the mainland, which bolstered widespread expectations for a rapid recovery in the world’s third-largest economy.

The official purchasing managers index (PMI) as well as a separate PMI published by CLSA were above the boom-or-bust 50 mark in May [ID:nPEK90485], laying to rest doubts about the pace of China’s economic recovery and triggering strong buying in mainland resources and industrial counters.

The strong data also helped investors overcome their jitters ahead of the largest ever U.S. manufacturing bankruptcy.

“The sentiment is so positive and everybody is so optimistic that they can look at this GM news and think this the last bit of really bad news we will get out of this crisis,” said Jackson Wong, investment manager at Tanrich Securities.


Chinese insurers surged on Monday with the extended rally in the mainland markets, up nearly 50 percent so far this year, seen boosting their investment income.

China Life 2628.HK jumped 6.6 percent to HK$30.10 in Hong Kong, while Shanghai-listed shares in Ping An Insurance 601318.SS raced up its 10 percent daily limit to 43.57 yuan in its heaviest volume in half a year.

The benchmark Hang Seng Index .HSI was up 4 percent or 717.59 points at 18,888.59, its highest closing level since September 2008.

The gauge rose 17 percent in May, its biggest single-month advance in a decade, and is currently trading at nearly 17 times the estimated earnings of its constituents in 2009. The no-longer-cheap valuations have a number of analysts betting on a short-term pullback in the equity market even as some indicators point to a further upside.

“The risk of a technical correction has increased with the strong rally,” said Francis Cheung, analysts with CLSA.

“The steepness of any correction really depends on the direction of the U.S. economy, which a growing consensus of economists believes could bottom in the second half of 2009,” he said.

Turnover on the exchange climbed to HK$100.3 billion from HK$92.2 billion on Friday.

The China Enterprises Index .HSCE of top mainland companies had risen 4.9 percent to 10,937.85, drawing from a 3.4 percent surge on the Shanghai benchmark.

The Shanghai Composite Index .SSEC ended at 2,721.280 points, its highest close since August of last year and marking its biggest daily percentage gain in three months.

Gaining Shanghai A shares outnumbered losers by 826 to 92, while turnover in Shanghai A shares picked up to three-week high of 156.1 billion yuan ($22.9 billion) from Wednesday’s 103.0 billion yuan. The market was closed last Thursday and Friday for a national holiday.

Several analysts said the index appeared likely to continue climbing to successive highs for the year, fuelled by ample liquidity in the markets and signs of economic recovery, although some warned it could be weighed down by plans to resume IPOs as early as this month after a suspension of more than eight months.

“Large caps have lifted the index quickly, leaving it vulnerable to increased pressure for profit-taking,” added Wu Nan, an analyst from Xiangcai Securities.


Offshore oil specialist CNOOC 0883.HK jumped 8.8 percent to HK$11.10 in Hong Kong after crude hit a seven-month high above $68 per barrel in Asian trade Monday.

PetroChina 601857.SS, Asia's largest oil and gas producer and the Shanghai index's most heavily weighted stock, surged 4.89 percent to 14.17 yuan after China announced its second and biggest increase in fuel prices this year. [ID:nSP391614]

Jiangxi Copper 0358.HK600362.SS climbed 8.7 percent in Hong Kong and 9.05 percent in Shanghai.

Gold miner Zijin Mining 2899.HK soared 13.6 percent to HK$7.96 after the price of the precious metal hit a three-month high, helped by a weak dollar and concerns about rising prices, while Zhoajin Gold 600489.SS jumped 9.5 percent to 84.01 yuan.

SAIC Motor Corp 600104.SS, China's biggest carmaker and a partner of General Motors Corp GM.N, was up 3.2 percent at 15.06 yuan, apparently unfazed by news that GM would file for bankruptcy protection on Monday. [ID:nN31495007]

Property giant China Vanke 000002.SZ rose 4.3 percent to 10.16 yuan after China lowered the minimum amount of capital required to launch investment projects for low- and medium-cost housing. [ID:nPEK354426] (Editing by Edmund Klamann & Chris Lewis)