January 15, 2013 / 4:40 AM / 5 years ago

China shares extend rally on macro outlook; Hong Kong slips

* CSI300 +0.5 pct to six-month high, financials lead

* Financial stocks lead macro-economic confidence

* Tally on firm footing as idle money enters market-analysts

* HSI touches 18-month high, then retreats

By Gabriel Wildau

SHANGHAI, Jan 15 (Reuters) - Mainland shares extended their five-week rally to reach a fresh six-month high on Tuesday, with financials again leading the charge, as the large-cap CSI300 index rose 0.5 percent to consolidate its sharp gain on Monday.

Analysts said that with financial shares in the lead, the Shanghai composite index, which sailed past the psychological 2,300-point barrier on Monday, could face little resistance until 2,500. Financials comprise the largest share of both the composite and large-cap indexes.

Hong Kong also touched an 18-month high but was down slightly by midday, with the benchmark Hang Seng Index giving up 0.3 percent against Monday’s close by midday.

“Money that was sitting on the sidelines has now been persuaded that the rally is sustainable,” said Zhang Weiguang, equity analyst at Shanghai Securities.

Investors often use financials as a way to profit from broad-based macro-economic growth. Monday’s 3.8 percent gain in the CSI300 was fuelled mainly by positive macro-economic sentiment, following data released late last week showing stronger-than-expected trade growth and healthy credit creation, analysts say.

Four of the top five index movers in the CSI300 on Tuesday were also financials, including Bank of Communications , which gained 1.0 percent, Minsheng Bank , up 0.8 percent, and insurer China Pacific, up 2.0 percent.

Ping An Insurance led the index, gaining 2.0 percent on top of its 4.2 percent gain on Monday, as investors regained confidence that HSBC’s stake sale would go through as planned, despite doubts raised last week.

Monday’s volume was the heaviest of the year at 145 billion yuan, adding to the view that the current rally is on a firm foundation. Liquidity was also strong on Tuesday, reaching 93 billion yuan ($14.95 billion) at midday.

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 2.82 percent near midday 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 on Monday were comments from the chairman of China’s securities regulator that quotas for foreign investment, which currently total only about 1.5 percent of total market capitalisation, could be raised by nine or ten times.


The Hang Seng Index rose more than a 100 points to 23,516, its highest since June 2011, before the index slid to 23,336 at 0334 midday, down 0.3 percent.

Property shares were under pressure, with China Overseas Land sliding nearly 2 percent, dragging the property subindex down 0.2 percent.

The China Enterprises Index of the top Chinese listings in Hong Kong eased 0.2 percent with Great Wall Motor losing 4 percent and Air China easing 1.5 percent.

“The underlying sentiment is still positive with sufficient liquidity in the market. Investors are still looking for fresh buying incentives in consolidating market,” said Patrick Yiu, a director at CASH Asset Management.

Shares of Li & Fung Ltd remained under pressure after Moody’s changed the global supply chain manager’s rating outlook to negative and investors questioned the credibility of earnings guidance from the company after it flagged a steep profit fall just two months after an analyst briefing.

Li & Fung’s stocks fell to as low as HK$11.32, the lowest since August 2011, before steadying at HK$11.54, down 1.7 percent.

Shares of China Taiping Insurance Holdings Co Ltd rose 4.5 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.

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