China shares slip again to more than 3-1/2-year low, crimp gains in Hong Kong

Wed Nov 21, 2012 5:37am GMT

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* HSI, H-shares +0.2 pct; CSI300 -0.2 pct

* Wuliangye, Moutai dive, contamination claims linger

* A-share weakness to persist on liquidity concerns: BoComm

* Angang Steel jumps after sale of Tianjin Angang Tiantie stake

By Clement Tan

HONG KONG, Nov 21 (Reuters) - Onshore Chinese shares sank further on Wednesday, hovering at their lowest since early 2009 and crimping gains in Hong Kong, where investors, cheered by positive U.S. housing data, rotated into recent laggards.

The Hang Seng Index was up 0.2 percent at the midday trading break, while the China Enterprises Index of the top Chinese listings in Hong Kong also rose 0.2 percent. Both went into the break at the low end of the day's range.

The CSI300 Index of the top Shanghai and Shenzhen listings slipped 0.2 percent, while the Shanghai Composite Index shed 0.4 percent after briefly dipping below 2,000 points. Both are near their lowest levels since March 2009.

"The two markets couldn't be more different right now. More positive U.S. data could buoy further gains in Hong Kong, but liquidity issues are going to weigh on the A-share market going into year's end," Hong Hao, Bank of Communications (BoCom) International Securities' head of China research, told Reuters.

More share offerings are due to hit the market as several lockups expire and the China Securities Regulatory Commission begins reviewing IPO applications, at a time when investor interest in stocks is already low, he said.

On Wednesday, shares of Chinese premium liquor producers, known more commonly as baijiu, were the biggest index drags after media reported that the Henan provincial food authority said while there was no evidence that Shenzhen-listed Jiugui Liquor added plasticizers into their products, more investigation is currently underway.

Wuliangye dived 2.7 percent to its lowest in almost 2-1/2 years, taking losses on the month to 16 percent. Kweichow Moutai shed 1.4 percent. Trading in Jiugui's shares has been suspended since Monday.

In a sign of things to come, shares of baijiu distributor Silver Base Group Holdings slumped 13.2 percent after it warned in a filing with the Hong Kong Exchange late on Tuesday that it expects to record a loss for the six months ending September led by the economic slowdown and the low season in the baijiu market in China.

Moutai shares were up as much as 28 percent on the year at the end of October, but losses amounting to 14 percent so far in November have trimmed its gains on the year to just 10 percent.

November is set to be Moutai's and Wuliangye's worst monthly showing since April 2010, as investors bailed on the baijiu sector as Communist Party leaders repeatedly warned against the perils of corruption over the course of the 18th Party Congress that ended last week.

The latest allegations against Jiugiu Liquor were first reported on Monday by the Guangzhou-based 21st Century Business Herald newspaper, which along with new Communist Party chief Xi Jinping's latest comments against corruption, triggered steep losses for the baijiu sector that day.

Chinese officials are often gifted bottles of baijiu by people seeking favour, suggesting demand for baijiu could be reduced after Xi Jinping was quoted by state media as saying on Monday that the party risks major unrest and the collapse of its rule if corruption is allowed to run wild.

CHINA MOBILE LEADS HONG KONG HIGHER

In Hong Kong, gains were led by shares of China Mobile , the country's largest mobile operator and a popular defensive play. China Mobile was up 1 percent at midday.

Angang Steel jumped 4.2 percent in Hong Kong and 1.5 percent in Shenzhen after saying it will sell its 45 percent stake in Tianjin Angang Tiantie Cold Rolled Sheets Co Ltd to the company's controlling stakeholder, Anshan Iron and Steel Group for 1.18 billion yuan ($189 million).

Angang also said it will focus on developing its domestic sales and distribution network.

China Resources Enterprises Ltd inched up 0.2 percent ahead of its third-quarter earnings. At the midday break, the Chinese-focus retail conglomerate, posted a 27 percent increase in third quarter net profit.

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