* HSI slips 0.4 pct on the day, 0.3 pct on the week
* CSI300 down 1.9 pct on Friday, 1.6 pct this week
* Higher-than-expected China inflation tempers easing hopes
* Profit taking hits Chinese property shares
* A-share out of overbought levels for 1st time since Dec 24
By Clement Tan
HONG KONG, Jan 11 (Reuters) - Mainland Chinese shares suffered their worst day in nearly four months on Friday, dragging Hong Kong into the red, after December inflation data came in higher than expected, crimping hopes of fresh monetary easing to nurse China’s economic recovery.
Chinese brokerages and growth-sensitive sectors led losses after annual consumer inflation accelerated to a seven-month high of 2.5 percent in December on rising food prices, surpassing a 2.3 percent Reuters poll consensus.
The Hang Seng Index shed 0.4 percent on Friday and 0.3 percent on the week. The China Enterprises Index of the top Chinese listings in Hong Kong fell 0.7 percent on the day and 0.8 percent on the week.
It was their first weekly loss in three.
On the mainland, the CSI300 of the top Shanghai and Shenzhen A-shares closed down 1.9 percent on the day and 1.6 percent on the week, while the Shanghai Composite Index shed 1.8 percent on Friday and 1.5 percent this week.
Losses on Friday were their worst since Sept. 20 and snapped a five-week winning streak for mainland indexes as their relative strength index (RSI) readings dropped out of overbought levels for the first time since Dec. 24.
“It’s not the end of the world. We have been trending in overbought territory for a while anyway, so this higher headline inflation is a trigger for some profit taking. We are in a consolidation phase,” said Hong Hao, Bank of Communication International’s chief equity strategist.
“I won’t worry too much about the higher inflation data, since much of it is down to rising food prices and extreme winter weather. But today’s data hurt some expectations for a cut in interest rates or bank reserve requirements in the first half of the year,” Hong added.
Before the inflation data was released on Friday, the official China Securities Journal reported that the central bank may cut benchmark interest rates once and cut the required reserve ratio once or twice in the first half of 2013 in a bid to lower corporate finance costs.
Beijing will target 8.5 trillion yuan ($1.37 trillion) in new local-currency loans in 2013 and 13 percent annual growth in the broad money supply (M2), the same paper reported, citing anonymous regulatory sources.
Shares of Aluminum Corporation of China (Chalco) in Hong Kong, which spiked 6.5 percent on Thursday after China’s trade data trumped expectations, dived 3 percent on Friday. Its Shanghai shares declined 2.7 percent.
Poly Real Estate dived 4.5 percent in Shanghai, wiping out its strong start to 2013 after surging 69 percent in 2012, easily outperforming the 7.6 percent rise for the CSI300.
In Hong Kong, smaller Chinese property developers saw the bigger percentage losses, with Country Garden sinking 4 percent. Hang Seng Index components, China Overseas Land and China Resources Land lost 1 percent and 0.9 percent, respectively.
Home prices in China had risen in four of the last five months before December. December’s larger-than-expected headline inflation stoked concerns that Beijing will enforce more stringently existing curbs on property developers to dampen home prices.
December home prices data is expected on Jan. 18, when monthly industrial output, urban investment, retails sales and fourth-quarter China GDP data will also be released.
Chinese brokerages were also hit by a report in the official Shanghai Securities News that China’s securities regulator reprimanded Citic Securities for failing to disclose Soochow Securities’ profit decline before its A-shares initial public offering.
Citic Securities, China’s largest listed brokerage, lost 3.9 percent in Shanghai and 2.1 percent in Hong Kong. Soochow Securities plummeted 6.1 percent in Shanghai.
Losses on Friday came in the highest Shanghai bourse volume this week, while Hong Kong turnover stayed relatively robust despite dropping 11 percent from Thursday’s three-week high.
“It was quite a heavy sell off in the afternoon in the A-share market today. I think we will start to see a rotation into the small- and mid-cap names, along with some of the laggard consumer stocks next week,” said a Shanghai-based dealer at a major Chinese brokerage.