INTERVIEW-Banks could be obliged to set Libor rates
* Alternatives to Libor to be found for some contracts
* HSI flat on the day, jumps 22.9 pct in 2012
* CSI300 up 1.7 pct on Monday, up 7.6 in 2012
* Chinese insurers, brokers up, CSRC mutual funds ruling helps
* A-H premium nears 100 parity after A-share Dec outperformance
By Clement Tan
HONG KONG, Dec 31 Mainland Chinese shares climbed to a six-month closing high on Monday, helping Hong Kong cut early losses as the onshore market closed out a first annual gain in three years helped by strength in brokerages and insurers.
Investors cheered a plan by the China Securities Regulatory Commission to allow eligible securities houses and insurers' asset management units to develop and manage mutual funds in its latest bid to revitalize the sector.
The Hang Seng Index closed flat at 22,656.9, hovering at its highest close since July 2011. Stiff chart resistance is next seen at around 22,800, intra-day highs last seen in July and August 2011. The benchmark jumped 22.9 percent in 2012.
The China Enterprises Index of the top Chinese listings in Hong Kong climbed 0.5 percent on the day and 15.1 percent in 2012. Hong Kong markets shut at midday for the New Year holiday and will resume trading on Wednesday.
The CSI300 of the top Shanghai and Shenzhen listings rose 1.7 percent on the day and 7.6 percent in 2012. The Shanghai Composite Index gained 1.6 percent on Monday and 3.2 percent this year.
This was the first annual gain in three years for the two onshore indexes and the H-share index, and the best year since 2009 for all four benchmarks. Mainland markets are closed for a three-day holiday and resume trading on Friday.
"Investors rotated into Chinese non-bank financial stocks from banking ones today in Hong Kong," said Jackson Wong, vice-president of equity sales at Tanrich Securities.
"Financial reform is a very strong theme and will carry into 2013, but cyclical counters with low valuations will probably lead a rally in the early weeks," said Jackson Wong, vice-president of Tanrich Securities
On Monday, China Life Insurance was the biggest boost to indexes in Hong Kong and China, jumping 5.8 percent to a 20-month high in Shanghai, bringing its 2012 gains to 21.3 percent.
China Life shares climbed 3.1 percent to their highest since August 2011 in Hong Kong, rising 32 percent in 2012. Smaller rival, Ping An Insurance rose 1.9 percent in Hong Kong and 3.4 percent in Shanghai.
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.
Shares of Citic Securities , China's largest listed brokerage, on Monday added a further 2.2 percent in Hong Kong and 1.5 percent in Shanghai. It finished 2012 up 53 percent in Hong Kong and 38 percent in Shanghai.
Tian Di Science & Technology, among 15 stocks added to the CSI300 with effect from Friday, rose 3.1 percent in Shanghai. Datang International Power Generation, among the 15 excluded, slipped 0.3 percent in Shanghai.
EARLY 2012 CYCLICAL RALLY TO REPEAT IN '13?
Despite outshining onshore peers in 2012, offshore Chinese shares finished 2012 way off the highest levels this year, mainly due to the underperformance of some growth-sensitive metal producer counters, which were plagued by inventory-related problems.
Chinese property-to-steel conglomerate Citic Pacific finished 2012 down 17.4 percent after rising by as much as 13.3 percent on the year in February.
Currently trading at a 27 percent discount to its forward 12-month earnings multiple, according to Thomson Reuters StarMine, Citic could see a repeat of its early 2012 rally as investors look to laggard cyclicals in early 2013, particularly if Chinese economic data come in better than expected.
On Monday, Hong Kong shares cut early losses while onshore Chinese markets 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.
An improving Chinese economy, along with signs that large institutional investors were returning to the A-share market after several market-boosting measures, has helped onshore markets outperform offshore peers in December.
Chinese fund managers raised their recommended equity weightings in December to a seven-month high with a strong preference toward financial stocks as an improved economic outlook and market performance boosted risk appetite, the latest Reuters fund poll showed.
The CSI300 and Shanghai Composite closed on Monday at their highest since June 20, largely on the back of a surge in December. They soared 17.9 and 14.6 percent this month, their respective best monthly gains since July 2009.
That has helped the Hang Seng Index A/H premium index creep back towards the 100 parity level, closing at 99.4 on Monday, after dipping below that level in late October, wiping out the premium that onshore shares has historically traded over offshore peers.
* Alternatives to Libor to be found for some contracts
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* Investors fear record fines, risk of countersuing regulator