Hong Kong shares erase 2013 gains, China slumps to 2-month low

Wed Mar 13, 2013 9:20am GMT

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* HSI -1.5 pct, H-shares -2.3 pct, CSI300 -1.1 pct

* China c.bank chief: monetary policy now neutral, no longer loose

* China banks and other beta plays lead losses

* Ajisen in record surge after 2012 earnings beat

By Clement Tan

HONG KONG, March 13 (Reuters) - Hong Kong shares erased 2013 gains on Wednesday, with losses accelerating in the late afternoon after the Chinese central bank governor said monetary policy in the world's second-largest economy was no longer loose.

Onshore Chinese markets, which closed shortly before comments from Zhou Xiaochuan were made public, suffered a fifth-straight daily loss in lackluster volumes led by the financial and property sectors.

The CSI300 of the leading Shanghai and Shenzhen A-share listings closed down 1.1 percent, while the Shanghai Composite Index shed 1 percent and is now down 0.2 percent this year. Both ended at their lowest since mid-January.

The Hang Seng Index slid 1.5 percent on Wednesday and is now down 0.4 percent this year. It closed just above chart support at around 22,445, the Feb. 27 trough that is the bottom end of a gap that it has hovered for the past three weeks.

The China Enterprises Index of the top Chinese listings in Hong Kong sank 2.3 percent and closed just below chart support at about 11,040, pointing at more losses ahead.

Losses came in Shanghai volume that was some 22 percent below its average in the past month. Hong Kong turnover, however, climbed to its highest since March 5.

"I think we can expect further losses. We are reaching a resolution in this consolidation phase, which we have been stuck in for a while," said Hong Hao, chief strategist at Bank of Communication International Securities.

The People's Bank of China's policy stance had shifted to neutral from loose and an M2 money supply growth target of 13 percent for 2013 meant policy was now prudently set to rein in the risk of rising prices, governor Zhou Xiaochuan said.

He also said the central bank would reinforce efforts to contain house price rises in 2013 as part of broad government efforts to restrain real estate speculation, but added that the central bank would stay focused on consumer and producer price inflation, rather than asset price rises.

China Vanke sank 2.4 percent in Shenzhen while Poly Real Estate dived 3.8 percent in Shanghai. China Resources Land tumbled 4 percent in Hong Kong, making it down 3.3 percent on the year.

Chinese property and financial sectors were additionally hurt by a report on the Sina online news portal that Shenzhen has imposed a freeze on housing prices this year. Caixin magazine reported that a senior city government official denied any knowledge of the matter.

Chinese property stocks have been caught in a jittery spell since the country's cabinet announced on March 1 more measures intended to curb speculative home demand amid rising prices.

A report in the 21st Century Business Herald newspaper about the Chinese banking regulator saying financial institutions should be cautious about buying bonds issued by local government financing vehicles also weighed on financials.

Haitong Securities shed 2.7 percent in Shanghai and 2.1 percent in Hong Kong. Bank of China shed 1 percent in Shanghai and 2.7 percent in Hong Kong.

Wednesday's media report indicated a widening of the banking regulator's crackdown on financial risk. On Tuesday, the official China Securities Journal reported that the China Banking Regulatory Commission is tightening regulation on asset-pooled wealth management products.

EARNINGS IN FOCUS

Cathay Pacific Airways slipped 0.4 percent after posting at midday an 83 percent plunge in 2012 profit. After markets closed, its chief executive said he cannot yet see a sustainable uptrend in cargo volume.

Shares of Ajisen (China) Holdings, which operates Japanese ramen restaurants in Hong Kong and China, surged 16.6 percent after reporting late on Tuesday a smaller-than-expected decline in 2012 full-year headline earnings.

Wednesday's showing was its record best daily gain and came after Ajisen also raised its dividend payout ratio. Barclays analysts said Ajisen's earnings topped forecasts mainly due to better-than-expected gross margins and to store closures.

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