Hong Kong, China shares edge up after US deal as Chinese data awaited

Thu Oct 17, 2013 5:48am BST

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* HSI +0.2 pct, H-shares +0.3 pct, CSI300 +0.4 pct

* Chinese banking H-shares weak before Q3 China GDP Friday

* Daphne dives after weak Q3 same store sales

* Li Ning surges after Goldman upgrade

* China coal miners spike after reported price rebound

By Clement Tan

HONG KONG, Oct 17 (Reuters) - Hong Kong and China shares crept higher early on Thursday after U.S. legislators reached a deal to raise the government's borrowing limit, but turnover stayed muted, suggesting investors did not return to the market in a big way.

Chinese banks limited benchmark gains in Hong Kong ahead of more economic data on Friday and after Everbright Bank became the latest in the sector to announce plans to tap offshore markets to meet capital adequacy requirements.

At midday, the CSI300 of the leading Shanghai and Shenzhen A-share listings was up 0.4 percent, while the Shanghai Composite Index climbed 0.5 percent.

Both closed on Wednesday at their lowest in more than a week. Shanghai's midday volume on Thursday was near the lowest this month.

The Hang Seng Index was up 0.2 percent at 23,281.7 points. The China Enterprises Index of the top Chinese listings in Hong Kong gained 0.3 percent, struggling for a fourth day at its 200-day moving average, a key technical level.

"Things just haven't looked quite right about the market since yesterday," said Alex Wong, Ample Finance's director of asset management.

"People seem to have discounted the U.S. deal because it was always expected, they look instead quite tentative about China data tomorrow and are preparing for a correction of sorts," Wong added.

On Friday, Beijing is due to release another batch of September economic data and the country's third-quarter GDP growth figure.

China's annual economic growth is forecast to have quickened in the quarter after slowing through the first half of the year, but the pick-up is expected to be short-lived as the government pushes on with its reform agenda.

On Thursday, shoe-retailer Daphne International added to unease, tanking 6.3 percent after the China-focused company posted an 18 percent annual decline in same-store sales in the third quarter and said predicting how this quarter will go is hard.

Shares of Belle International, another big shoe retailer, slipped 1.2 percent.

However, sporting retail counters showed strength in spite of the patchy outlook for China retailers.

Li Ning surged nearly 12 percent after Goldman Sachs upgraded it from "neutral" to "buy," suggesting the company's turn-around efforts over the last 18 months will soon bear fruit.

The Chinese commerce ministry said on Thursday that domestic consumption is likely to recover in the fourth quarter, but warned of slow external demand from emerging markets that could post a challenge to the country's trade.

Data on Thursday showed the world's second-largest economy drew $8.4 billion in foreign direct investment in September, up 4.9 percent from a year earlier.

Chinese lenders, often seen as proxy for economic growth in the mainland, underperformed in Hong Kong. China Minsheng Bank , which closed on Tuesday at its highest since Sept. 25, fell 0.8 percent.

Everbright Bank announced plans to push ahead with a third attempt in as many years at listing in Hong Kong, a move that created some unease that more Chinese mid- and small-sized commercial lenders will seek to raise funds.

In Shanghai, shares of Everbright Bank rebounded 0.7 percent after closing on Wednesday at their lowest since Sept 26.

There were also gains for Chinese coal counters, buoyed by short covering in Hong Kong after local media reported domestic coal prices rose for the first time since November 2012. China Coal Energy spiked 5.7 percent in Hong Kong and 3.4 percent in Shanghai.

Zhuzhou CSR Times Electric climbed 4.6 percent after Malaysian media reported the company is expected to win a maintenance contract from Malaysia's railway operator.

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