(Corrects to exclude private equity to clarify eligible parties in paragraph 4)
* HSI flat, H-shares +0.5 pct, CSI300 +1.2 pct
* HSI gains 22.9 pct, H-shares 15.1 pct in 2012
* Chinese insurers, brokers strong, CSRC to allow mutual funds
By Clement Tan
HONG KONG, Dec 31 Hong Kong shares hovered near their highest close in almost 18 months on Monday, with Chinese insurers and brokerages helping the benchmark indexes close out their best year since 2009.
The Hang Seng Index closed flat on the day at 22,656.9 points, near its highest close since early July 2011, while the China Enterprises Index of the top Chinese listings in Hong Kong rose 0.5 percent. Trading ended at midday ahead of the New Year holiday.
The indexes rose 22.9 percent and 15.1 percent, respectively in 2012.
Mainland Chinese markets looked set for their first annual gain in three years, as investors cheered a plan allowing eligible securities houses and insurers' asset management units to develop and manage mutual funds.
The CSI300 of the top Shanghai and Shenzhen listings was up 1.2 percent by the midday trading break, while the Shanghai Composite Index rose 1.1 percent.
They are now each up 7 percent and 2.7 percent on the year, respectively, which could be their best monthly performance since July 2009. The gains were largely on the back of a surge in December that came in elevated volumes.
Hong Kong markets cut early losses, while mainland Chinese shares extended gains after a survey of private factory managers showed activity in China's manufacturing sector hit its fastest pace in December since May 2011.
"I am quite surprised to see Hong Kong markets follow A-share strength, seemingly shrugging off stalled U.S. fiscal cliff talks," said Jackson Wong, Tanrich Securities' vice-president for equity sales.
U.S. lawmakers pushed the country to the edge of the "fiscal cliff" on Sunday as they struggled to reach a last-minute deal that could protect the world's largest economy from a politically induced recession.
On Monday, shares of China Life Insurance , the country's largest insurer, were the leading boosts to benchmark indexes in Hong Kong and China, rising 3.1 percent to its highest since April 2011 in Shanghai.
New China Life Insurance rose 6 percent in Shanghai and 2.6 percent in Hong Kong.
The announcement by the China Securities Regulatory Commission was its latest bid to reinvigorate an industry struggling to produce returns for investors and introduce more competition in an already-crowded mutual funds sector.
This follows an announcement last week allowing brokerages to sell subordinated debt and the Chinese central bank pledging to quicken the pace of reforming the financial sector that sent shares of Chinese brokerages soaring last Friday.
Citic Securities , China's largest listed brokerage, rose 2.2 percent in Hong Kong 0.9 percent in Shanghai, adding to strong 2012 gains. It is now up 52.9 percent in 2012 in Hong Kong and 36.8 percent in Shanghai. (Editing by Kim Coghill)
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