China shares to snap 4-day losing streak, Hong Kong strong too

Clement Tan
Reuters Middle East

* HSI +0.6 pct, H-shares +1.3 pct, CSI300 +0.9 pct

* HSI set to outperform A-shares for 6th straight month

* China equities see 11th straight week of net flows: EPFR

* HKEx down 1 pct after $1 bln new share issue to fund LME


HONG KONG, Nov 30 (Reuters) - Mainland Chinese shares were

set for their first gain this week on Friday, joining Hong Kong

by advancing ahead of data due over the weekend expected to show

that China's factory activity expanded at its fastest pace in

seven months in November.

Hong Kong shares were set to show a gain for the third month

in a row, outperforming onshore markets for a sixth straight

month and extending a divergence that has reversed the premium

that A-shares typically trade over H-shares.

On Friday, the Hang Seng Index went into the midday

trading break up 0.6 percent at 22,051.4 points, while the China

Enterprises Index of the top Chinese listings in Hong

Kong rose 1.3 percent. They are up 1.9 and 0.4 percent on the


On the mainland, the CSI300 Index of the top

Shanghai and Shenzhen listings climbed 0.9 percent, while the

Shanghai Composite Index rebounded 0.6 percent from its

lowest closing level since January 2009, set on Thursday.

They were down 5.3 and 4.6 percent this month, respectively.

"Fund managers in the mainland are not sure the A-share

market has bottomed and are looking for ways to switch to

H-shares or other higher-yielding investment vehicles," said

Edward Huang, chief strategist at Haitong International


"They are also beginning to think about switching out of the

sectors that have outperformed this year, but investors

shouldn't expect too much from policy reforms from China's

annual central economic meeting in mid-December," Huang added.

Data from EPFR Global, a firm that tracks global fund flows

and asset allocation, showed China equities had an eleventh week

of net inflows last week, amid the largest equity inflows

globally last week in two years, according to Bank of

America-Merril Lynch analysis.

On Friday, the Chinese property sector, which has

outperformed strongly this year, was once again strong. China

Resources Land jumped 5.3 percent to HK$21.05, taking

its gains on the year to 69 percent.

Chart resistance is seen at HK$20.85, which is its previous

high recorded on Oct. 21, 2009.

Chinese growth-sensitive plays were also broadly stronger.

Anhui Conch Cement, the largest cement producer in the

mainland, jumped 3.4 percent in Hong Kong and 4.9 percent in


China's official purchasing managers' index (PMI) in

November may have rebounded to 50.6 from October's 50.2, the

median estimate of 11 economists polled by Reuters showed. A

reading above 50 points points to accelerating activity.


A contamination scare last week involving Jiugui Liquor

worsened losses on the month for the alcohol sector,

after repeated anti-corruption calls by China's top leaders in

the lead up to the 18th Communist Party Congress earlier this

month put pressure on a sector that had been outperforming.

Jiugui Liquor slid 2.2 percent on Friday. It has now lost a

third of its market cap since it resumed trading last Friday

after a four-day suspension following press reports alleging its

products contained excessive toxic materials.

Sector heavyweight Wuliangye was down 1 percent

on Friday, bringing its losses to 20 percent in November, its

worst monthly performance in more than four years.

Kweichow Moutai was up 28 percent on the year at

the end of October, but losses exceeding 13 percent in November

have trimmed its annual gain to 11.3 percent.

The brokerage sector, which was hit by speculation of

possible commission fee cuts that could further hurt their

profitability, was mixed despite local media reporting otherwise

on Friday, citing unnamed officials from China's securities


Larger brokerages such as Citic Securities

recovered, rising 0.8 percent in Shanghai, but smaller players

stayed weak. The sector broadly rebounded in Hong Kong, with

Citic up 1.9 percent in strong volumes.

Hong Kong Exchange (HKEx) shed 1 percent to

HK$123.60 after it raised $1 billion to fund its takeover of the

London Metal Exchange. A new issue of 65.705 million shares was

priced at HK$118 each, a 5.45 percent discount to its closing

price on Thursday.

The Hong Kong government said in late morning trade on

Friday that it will subscribe to $58 million worth of new HKEx


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