China shares surge on economic recovery hopes, boost Hong Kong

Clement Tan
Reuters Middle East

* HSI +1.4 pct, H-shares +2 pct, CSI300 +3.9 pct

* Midday Shanghai volume exceeds Tuesday full day total

* China urbanization-related sectors outperform

* Ping An Insurance jumps after HSBC finalizes stake sale

HONG KONG, Dec 5 (Reuters) - Onshore China shares jumped on

Wednesday, boosting stocks in Hong Kong, as investors cheered

comments from new Communist Party chief Xi Jinping that buoyed

hopes for an economic recovery.

Both markets outperformed other Asian bourses after Xi, in

comments ahead of the central economic planning meeting later

this month, listed tax reform, urbanization and allowing the

market to play a bigger role in setting resource prices as among

his key priorities.

The CSI300 Index of the top Shanghai and Shenzhen

listings jumped 3.9 percent, while the Shanghai Composite Index

rose 3 percent to 2,034.6, returning above the

2,000-point level for the first time since Nov. 27.

The gains helped both onshore Chinese indexes recover

further from near four-year lows touched earlier this week.

The Hang Seng Index went into the midday trading

break up 1.4 percent at 22,094.2, just below its 2012 intra-day

high of 22,162.5, set on Monday. The China Enterprises Index

of the top Chinese listings in Hong Kong climbed 2


"We are due for a short-term bounce anyway. Xi's comments

suggest he thinks the slowdown in the Chinese economy has

bottomed and inflation is not going to be a big problem," said

Hong Hao, chief equity strategist at Bank of Communications

International Securities.

Xi's comments on urbanization helped Chinese property and

railway stocks extend their strong gains this year. China

Railway Group climbed 2.9 percent in Hong

Kong 4.7 percent in Shanghai.

China Vanke, the country's largest developer by

turnover, jumped 4.1 percent in Shenzhen to its highest since

August after more than doubling sales in November from a year


Vanke is up 25 percent on the year, compared to the 5.6

percent decline on the CSI300.

In Hong Kong, property developer Evergrande soared

6.4 percent to its highest in almost five months, while China

Resources Land jumped 3.5 percent, bringing its gains

on the year to 67 percent.

This compares to the Hang Seng Index's 20 percent gain and

the China Enterprises Index's 8 percent rise in 2012.

Angang Steel rose 3.7 percent in Hong Kong after

Goldman Sachs upgraded its view from "sell" to "buy", expecting

the company to turn a profit in 2013 on higher growth in steel

prices than input costs as the company seeks to cut costs.


The volume of trade by midday in Shanghai exceeded Tuesday's

total for the day, suggesting that domestic retail investors

could be returning to the A-share market.

Gains in the onshore market could assist new listings,

particularly with Chinese state-owned insurer PICC Group

expected to make its Hong Kong debut on Friday after

raising $3.1 billion in an offering last week that was priced

near the bottom of its range.

Still, Zhengzhou Coal Mining Machinery slipped 8.5

percent from its HK$10.38 listing price in its Hong Kong debut

on Wednesday after underwriters of the $300 million offering

were stuck in the rare position of holding unsold stock.

Shares of Ping An Insurance jumped 4.6

percent in Hong Kong and 4.2 percent in Shanghai after HSBC

Holdings said it sold its entire stake in China's

second-largest insurer to a group linked to Thailand's richest

man, Dhanin Chearavanont.

China Development Bank was a key backer of the HSBC stake

sale, which is now Asia's second-largest deal this year. The

Chinese policy bank also signed a $20 billion financing

agreement with ZTE Corp .

Shares of the world's fifth largest telecom equipment maker

rose 3.5 percent in Hong Kong and 5.1 percent in Shanghai.

Nomura analyst Huang Leping said the contract should increase

investors' confidence on ZTE to maintain steady overseas sales


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