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China stocks rise pre-MSCI decision but ChiNext slumps; Hong Kong up
June 8, 2015 / 4:52 AM / 2 years ago

China stocks rise pre-MSCI decision but ChiNext slumps; Hong Kong up

* CSI300 +0.7 pct; SSEC +0.9; HSI +0.3 pct

* MSCI to decide Tuesday whether to put China stocks in index

* ChiNext shares slump after fund association sees risks

By Samuel Shen and Pete Sweeney

SHANGHAI, June 8 (Reuters) - China's benchmark indexes rose on Monday morning, with a jump in banking and transportation stocks offsetting a slump in tech shares as investors dumped small caps for blue chips on concern about a regulatory crackdown on excessive valuations.

The CSI300 index rose 0.7 percent, ending morning trade at 5,268.63 points. while the Shanghai Composite Index gained 0.9 percent, to 5,068.47 points. Hong Kong stocks were also firmer by midday.

Shenzhen's tech-heavy growth board ChiNext slumped 4.3 percent, after China's asset management association called on mutual fund managers to refrain from speculative trading and from blindly following the market trend.

The caution came after mutual funds were blamed by local media for contributing to ChiNext's lofty valuations. The growth board currently trades at 143 times earnings - a valuation that rivals the tech-heavy Nasdaq in the U.S. at the height of the dotcom bubble.

But the Shanghai market, home to blue chip shares, had a much stronger performance.

MSCI will announce on June 9 whether it will include so-called China 'A' shares in its Emerging Markets Index, a decision that the index publisher says would draw $400 billion to China stocks over time.

Some large caps that could benefit from the inclusion, such as banks, had a stronger performance as "Investors seem to be building positions ahead of the announcement," said Gerry Alfonso, director at Shenwan Hongyuan Securities Co.

The market shrugged off Monday's trade data, which showed China's exports in May fell less than expected but imports suffered a double-digit drop.

China's market is becoming increasingly volatile, partly due to high leverage and the emergence of a breed of creative traders employing complex trading strategies in the fledging derivative market.

The Hang Seng index added 0.3 percent, to 27,350.09 points. The Hong Kong China Enterprises Index gained 1.5 percent, to 14,115.91.

Financial stocks were strong on both markets. Bank of Communications shares jumped by their 10 percent limit in Shanghai and 7.7 percent in Hong Kong, as investors continue to bet the state lender will have reforms letting private investors play a more active role in management.

Transportation stocks also jumped, led by CRRC Corporation Limited , up 10 percent in Shanghai and 5.3 percent in Hong Kong.

After a month-long trading halt, CRRC attracted investors piling into the train maker that is now the world's largest in market value following a merger between CSR Corp and China CNR.

The CSI's tech index dropped 2.9 percent. (Editing by Richard Borsuk)

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