December 29, 2016 / 4:47 AM / 2 years ago

China stocks up on easing liquidity stress; Hong Kong barely moves

* SSEC 0.2 pct, CSI300 0.2 pct, HSI -0.1 pct

* Mainland bond scandal sees fresh progress

* Tencent shares up on new wechat service

SHANGHAI, Dec 29 (Reuters) - China stocks reversed early losses and edged higher on Thursday morning amid signs of easing liquidity stress, but gains were capped on news that the insurance regulator could introduce more measures to deter aggressive stock investment by insurers.

Hong Kong stocks ended the morning session in negative territory, with strength in tech stocks outweighted by the bearish influence of Wall Street, where stocks lost the most in two months overnight.

The CSI300 index rose 0.2 percent, to 3,309.78 points by the end of the morning session, while the Shanghai Composite Index gained 0.2 percent, to 3,109.14 points.

The Hang Seng index dropped 0.1 percent, to 21,733.26 points, while the Hong Kong China Enterprises Index lost 0.3 percent, to 9,275.77 points.

Investors on the mainland found some solace from progress made to avoid defaults resulting from a recent bond scandal. Sealand Securities said on Thursday it had signed agreements with 19 counterparties to resolve the “forged” bond dispute.

Reflecting fading fears of a liquidity crunch, China’s 10-year treasury futures rose nearly 1 percent by the lunch break.

But investors stayed cautious following news that the insurance regulator planned to establish a discriminatory supervision system that would keep a closer watch on some unconventional insurance products, in the latest move to rein in aggressive stock investment.

Most sectors in China gained modest ground, with industry sector the best performer, up more than 0.6 percent.

In Hong Kong, sector performance was mixed.

An index tracking information technology stocks added more than 2 percent at the lunch break, after receiving a boost from index heavyweight Tencent Holding Ltd.

Shares of the tech giant gained the most in seven weeks and were up around 2.6 percent at midday, after Tencent said on Wednesday that the long-awaited “Little Program” feature of its popular messaging application WeChat would go live on January 9.

Reporting by Jackie Cai and John Ruwitch; Editing by Simon Cameron-Moore

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