China shares fall ahead of GDP data, pull Hong Kong lower

Wed Jan 16, 2013 5:20am GMT

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* HSI -0.2 pct, H-shares -0.9 pct, CSI300 -0.4 pct

* HK midday turnover lowest this year

* Profit taking hits Chinese financial, railway stocks

* Kweichow Moutai sinks, dropped censure on price cutters

By Clement Tan

HONG KONG, Jan 16 (Reuters) - Mainland Chinese shares retreated from 7-1/2-month highs on Wednesday, weighing on the Hong Kong market, as investors took profits on recent outperformers such as Chinese financials ahead of more China economic data at the end of the week.

The Hong Kong property sector was mixed even as the territory's chief executive announced measures in his annual policy address to provide about 300 hectares of land for 128,700 housing units in the short- to medium-term to cool soaring home prices.

The Hang Seng Index went into the midday trading break down 0.2 percent at 23,333.8 points, retreating further from the 23,400 level that has stymied gains for the benchmark for much of the past two weeks.

The China Enterprises Index of the top Chinese listings in Hong Kong fell 0.9 percent as morning turnover in the Chinese territory sunk to its lowest this year.

On the mainland, the Shanghai Composite Index declined 0.4 percent while the CSI300 of the top Shanghai and Shenzhen A-shares slipped 0.3 percent.

Fresh inflows had pushed China shares on Tuesday to their highest levels since early June. The CSI300 has surged more than 20 percent since early December on signs that China's economy was regaining momentum.

Data showing China's foreign direct investment inflows falling by a smaller percentage in December than the month before helped trim losses, ahead of fourth-quarter GDP and December industrial output, retail sales and house price data expected on Friday.

China's annual economic growth may have quickened to 7.8 percent in the fourth quarter a Reuters poll showed, snapping seven straight quarters of weaker expansion, but the recovery is likely to be tepid and the economy may need continued policy support.

"We might see more interest in Hong Kong property developers later, but otherwise there is no real reason to enter the market today," said Jackson Wong, Tanrich Securities' vice-president of equity sales.

"Wall Street's fading rising momentum is a concern in Hong Kong and we are awaiting China's Q4 GDP," Wong added.

Hong Kong developer Sun Hung Kai Properties slipped 0.2 percent, while New World Development shed 0.3 percent and Cheung Kong Holdings edged up 0.2 percent.

Shares of China Life Insurance, the country's largest insurer, fell 1.5 percent off a one-week high in Hong Kong and 2.4 percent from a 21-month high in Shanghai.

China railway counters, which carried strong 2012 gains into the new year, were also weaker on the day. China Railway Construction dropped 1.6 percent in Hong Kong. Losses on Wednesday trimmed its 2013 gains to 5 percent after a 106 percent surge in 2012.

Kweichow Moutai sank 2.5 percent after the official Shanghai Securities News reported that the leading producer of premium Chinese white spirits has dropped sanctions on suppliers for reducing prices.

CHINA PROPERTY IN FLUX

Shares of Chinese property developers were a key source of weakness in the onshore market after a series of news headlines triggered some profit taking on the sector after it led a broad market jump on Monday.

China Business News reported that Beijing must prevent stimulative monetary policy from diminishing the impact of property controls, citing a report by a think tank under the Ministry of Land and Resources.

Poly Real Estate lost 1.9 percent in Shanghai, leading a sub-index of property-related stocks down 1.3 percent. China Overseas Land lost 1.2 percent in Hong Kong.

Various official media reported that outgoing Premier Wen Jiabao said more research is required on tax reforms to ensure the healthy development of the real estate sector and equitable income distribution.

The official China Securities Journal reported on Wednesday that Beijing may need to increase land supply in first-tier cities this year to stabilize land prices and market expectations, citing unidentified sources.

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