Hong Kong shares end lower, China hits multi-month highs

Mon Feb 4, 2013 9:22am GMT

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* HSI -0.2 pct, H-shares -0.5 pct, CSI300 +0.2 pct

* HSI fails at 23,900 for second time in four days

* China insurers slide after HSBC's Ping An stake sale approval

* China banking sector strong, Minsheng up again

* Kweichow Moutai at lowest close since May 2011

By Clement Tan

HONG KONG, Feb 4 (Reuters) - Hong Kong shares reversed early gains to end lower in choppy Monday trade, as investors took profit on the Chinese insurance sector after mainland regulators approved HSBC's sale of its remaining stake in Ping An Insurance.

Investors rotated into Chinese banking stocks, giving further chase to the rally in the sector at the start of the last full week of trading before the Lunar New Year holiday.

The Hang Seng Index closed down 0.2 percent at 23,685 points after failing at chart resistance at 23,900 for the second time in four days. The China Enterprises Index of the top Chinese listings in Hong Kong fell 0.5 percent.

In the mainland, however, the CSI300 of the top Shanghai and Shenzhen A-share listings ended up 0.2 percent at 2,748 points, its highest close since November 2011. The Shanghai Composite Index gained 0.4 percent.

Gains in Shanghai came in the highest volume since March 2012. Both onshore Chinese indexes have bounced 30 and 24 percent, respectively, from a Dec. 3 low.

"Most investors still remain very invested in the market, torn between wanting to take some profit because they sense a short-term correction coming up and not wanting to miss the next leg up," said Jackson Wong, Tanrich Securities' vice-president for equity sales.

Wong added that infrastructure-related stocks that have recently corrected could see the next leg of rotational buying, with the market's focus after the Lunar New Year holiday likely turning towards China's annual parliamentary meeting starting in early March.

Chinese railway counters are one example. On Monday, shares of China Railway Group lost 0.9 percent in Hong Kong and 1 percent in Shanghai. China Railway Group has tumbled 7 percent in Hong Kong from a Jan. 15 peak.

Chinese insurers were another source of weakness on Monday. Investors took profit on the sector after the approval late on Friday from China's insurance regulator for HSBC's sale of its remaining $7.4 billion stake in Ping An Insurance .

Ping An's shares slid 2.8 percent to HK$68.90 in an intra-day reversal in Hong Kong, but stayed above the HK$59 per share level that HSBC had priced its stake sale. Its Shanghai shares climbed 1.4 percent.

Its larger rival, China Life Insurance slipped 1.9 percent to its lowest close since Dec. 31 in Hong Kong. China Life's Shanghai shares slid 2.2 percent.

Shares of Bank of China climbed 1 percent in Hong Kong to its highest close since June 2011. Gains nearing 43 percent from a Sept. 5 low have now prodded BOC's relative strength index (RSI) values to its most overbought level since October 2010.

Mid-sized rival China Minsheng Bank jumped another 2.7 percent each in Hong Kong and Shanghai to new multi-month highs, extending strong gains since December.

Coal counters were also strong in the A-share market, as investors welcomed local news reports of a new policy aimed at more sustainable mining practices. In Shanghai, China Shenhua Energy Co Ltd rose 2.7 percent to its highest in three weeks.

LUNAR NEW YEAR PLAYS

CICC strategists said on- and offshore Chinese shares tend to generate "decent market returns before the Chinese New Year, while relatively muted after," with industrials and material sectors stronger before the holidays.

Both CSI300 and Shanghai Composite indexes have yielded positive returns in the five days leading up to the Lunar New Year holiday since 2003, according to a Hong Kong-based trader.

Those two were outperformers among sectors in Shanghai on Monday, with the Shanghai materials sub-index up 1.1 percent and the industrial sub-index up 0.7 percent.

Shares of Chinese premium booze producers were hit by a People's Daily commentary urging government departments to stop using public money during the upcoming Lunar New Year as part of an official campaign to fight corruption.

Kweichow Moutai fell 2.2 percent to its lowest close since May 2011 in Shanghai. Its shares have slumped almost 32 percent from a July 12 peak.

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