Hong Kong shares reach another 19-month high, China property strong

Thu Jan 3, 2013 5:33am GMT

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* HSI +0.1 pct, H-shares +0.4 pct, China shut

* China property strong, Shimao post strong 2012 sales

* China autos strong as Korean rivals fall

* Huaneng Power toppled from 5-year high

By Clement Tan

HONG KONG, Jan 3 (Reuters) - Hong Kong shares crept to another 19-month high, with last year's growth-sensitive laggards leading gains on Thursday after further positive China data affirmed the recovery trend in the world's second-largest economy.

Country Garden and Kaisa Group led gains among Chinese property stocks after getting a solid response on Thursday when they became the first two companies to tap the credit market in Asia this year.

The Hang Seng Index went into the midday trading break up 0.1 percent at 23,338 points, its highest intra-day level since June 1, 2011. The China Enterprises Index of the top Chinese listings in Hong Kong rose 0.4 percent.

The HSCE's 4 percent jump on Wednesday - its biggest daily gain in a year - took it to the highest point since August 2011. Its relative strength reading suggests the index is now at its most overbought levels since October 2010.

Mainland Chinese markets remained shut on Thursday and will kick off the new year on Friday.

"Strength in the Chinese property and insurance sectors is underpinned by solid investment themes," said Alex Wong, director of asset management at Ample Finance Group.

"There's some rotational buying going on after the big jump yesterday, as well as some more chasing of 2012 laggards," added Wong, who said he bought shares of Asia insurance giant AIA Group on weakness on Thursday.

Shares of Country Garden, which have risen in each of the last seven sessions, jumped 5.1 percent on Thursday after it announced it is conducting an international offering of senior notes with a 10-year maturity.

Shimao Properties also jumped 5.1 percent after it reported a 50 percent jump in contracted sales in 2012 from the previous year, suggesting that demand in the mainland remained robust despite curbs on home purchases.

Citi analysts said in a note dated Jan. 2 they expect the rapid increase in market transactions in the last quarter of 2012 will carry into this year, with smaller developers starting to aggressively buy land in the second quarter.

Citi's top picks in the sector include counters that are focused on tier 1 and 2 cities, have high sales-growth sustainability and good execution ability. Among its picks are Shimao, China Resources Land and Shenzhen-listed China Vanke.

China Resources Land jumped 4.7 percent to a record high on Thursday. It surged 69 percent in 2012, compared with the 23 percent jump for the Hang Seng Index.

The Chinese auto sector was also a key outperformer on the day, with traders citing a mainland news report that Beijing city government bought 5,000 new energy vehicles.

Geely Auto rose 2.4 percent, Brilliance China gained 4.2 percent, while Baoxin Auto soared 8.2 percent.

The sector's broad strength contrasted with the slump in the shares of Korean rivals as the rising won threatens to sap their profits. Shares of Japanese peers did not trade as Tokyo's market remained shut for the New Year holiday.

CHASING LAGGARD CYCLICALS

Chinese coal stocks, among the biggest laggards in 2012, rose on Thursday on hopes of improving economic growth. In 2012, these stocks were hurt by expectations of reduced demand as China's economy slowed.

Growth in China's increasingly important services sector accelerated in December at its fastest pace in four months, adding to signs of a modest economic revival at year-end.

Yanzhou Coal, down 22.7 percent in 2012, rose 3.5 percent. China Coal Energy, up 0.5 percent in 2012, climbed 2.3 percent.

The coal sector's strength came as Chinese power producers saw the bigger percentage losses on the day. Huaneng Power , which closed at a five-year high on Wednesday, dropped 2.2 percent.

Coal counters have been on a steady climb since China, the world's top coal importer, said late last year it would scrap a regulation to cap spot thermal coal prices and would no longer intervene in annual coal price negotiations between sellers and utilities starting in 2013.

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