(Updates to close)
* HSI +0.5 pct, H-shares +0.9 pct, CSI300 flat
* BOC leads Chinese banking rise in HK after UBS upgrade
* MGM China jumps after govt approves new casino
* A-share market cheers reported China IPO overhaul
By Clement Tan
HONG KONG, Jan 9 (Reuters) - Hong Kong shares bounced from their lowest in a week on Wednesday, resuming a start-of-the-year rally that had benchmark indexes headed towards multi-month highs, with Chinese banks stronger following a brokerage upgrade.
Mainland Chinese markets pared losses after Reuters reported that the mainland IPO market could be frozen until the end of March, reducing concerns of an oversupply of new shares competing for limited funds in the A-share market.
The Hang Seng Index rose 0.5 percent to 23,218.5, with chart resistance next seen at 19-month highs set last Thursday at about 23,400 points. Hong Kong turnover was the lowest so far this year.
The China Enterprises Index of the top Chinese listings in Hong Kong climbed 0.9 percent after its worst daily loss in two months on Tuesday had sent the H-shares index to its lowest since Jan. 2.
In the mainland, the Shanghai Composite Index and CSI300 both ended flat, hovering near its highest since mid-June after a strong December surge. Shanghai bourse volumes stayed robust as investors rotated into laggards.
“We are running into chart resistance now, so investors are looking to rotate into laggards. There is no need to be too bearish right now, at least in the first quarter,” said Hong Hao, Bank of Communications International Securities’ chief strategist.
On Wednesday, Bank of China (BOC) climbed 1.1 percent to HK$3.59 after UBS raised its price target by 31 percent from HK$3.05 to HK$4, citing its attractive valuation with BOC the least expensive among the larger H-share banks.
UBS analysts said that BOC’s off-balance sheet wealth management products (WMP) is the lowest among bigger Chinese banks. BOC is the country’s fourth-largest bank.
“Regulatory scrutiny on WMP is likely to mitigate systemic risk, at the expense of the banks’ rising embedded losses and the crowding out effect on small and medium enterprise lending,” UBS analysts said in a separate broader report on the Chinese banking sector dated Jan. 8.
Chinese banks were among the top boosts to the Hang Seng Index. Other than BOC, Industrial and Commercial Bank of China (ICBC) rose 0.9 percent in Hong Kong after UBS raised its target price by almost 21 percent. Its Shanghai listing gained 0.2 percent.
Still, gains for both BOC and ICBC in Hong Kong came in elevated short selling interest, accounting for about 19 percent of their respectively turnover on the day, according to traders, suggesting scepticism remains on the Chinese banking sector.
ICBC shares have rallied about 40 percent in Hong Kong from a trough on Sept. 5, while BOC have jumped about 30 percent.
China Railway Group jumped 5.1 percent to close at its highest since April 2011 after JP Morgan raised its target price for its Hong Kong listing by about 41 percent, extending the time horizon for the target to December this year.
According to Thomson Reuters StarMine, JP Morgan’s Karen Li is among the five most accurate analysts in forecasting China Railway Group’s earnings.
MGM China shares spiked 7 percent to their highest close since August 2011, outperforming Macau sector rivals, after the company received government approval for a $2.5 billion Macau casino.
Onshore Chinese markets hovered at near seven-month highs, with gains in alcohol producers offset by lingering weakness in the financial sector ahead of a fresh batch of data that should feed expectations of a recovery in the world’s second-largest economy.
Both onshore indexes were headed for losses on the day until Reuters reported about 20 minutes before market close that China’s securities regulator is requiring underwriters and auditors of all applicants for A-shares initial public offerings to review their financial statements to make sure they are in order.
Beijing is expected to post December trade data on Thursday and monthly inflation data on Friday, with quarterly foreign reserve data and monthly loan growth and money supply data by Monday.
Kweichow Moutai rose 2.7 percent to near its highest in about two weeks, continuing its recovery from a Dec. 6 trough. Moutai shares slumped 12.7 percent in November, its worst monthly loss since April 2010.
On Wednesday, investors cheered more news reports of the bigger producer of Chinese premium white spirits cracking down on suppliers reducing prices ahead of the Chinese New Year in February.
China insurers were weak again in the onshore markets, with Ping An Insurance declining 0.9 percent after losing 3.7 percent on Tuesday in its worst single day loss since Oct. 29.
Zoomlion Heavy Industry tumbled 6.4 percent in Hong Kong and 3.2 percent in Shenzhen, despite the company’s denial of a Hong Kong media report concerning irregular accounting. (Editing by Simon Cameron-Moore)