Shanghai shares at 3-mth high on reform optimism, HK trims losses

HONG KONG: Shanghai shares hit their highest in nearly three months early on Wednesday, helping to pare losses in Hong Kong, on expectations that Beijing could move faster on reforms.

Agricultural technology and construction-related counters spiked after the official Xinhua news agency reported that China's decision-making Politburo will push forward with land reforms in a steady rollout of its plan for "new urbanisation".

At midday, the Shanghai Composite Index was up 1.3 percent at its highest intra-day level since Sept. 12. The CSI300 of the biggest Shanghai and Shenzhen A-share listings also spiked 1.3 percent.

The Hang Seng Index slipped 0.4 percent to 23,827.1 points after sliding by as much as 1.3 percent at one point. The China Enterprises Index of the top offshore Chinese listings in Hong Kong was flat.

Mainland gains came in markedly higher Shanghai volumes, which at midday have nearly surpassed Tuesday's full day total. In another bullish measure, only 14 of 300 components on the CSI300 index were lower by the lunch trading break.

"Last night's Xinhua report is about land reforms. There was no strong language on property curbs, so the interpretation is that there will not be more from the central government, leaving it to the local governments," said Hong Hao, chief strategist at Bank of Communications International.

Chinese property A-shares were broadly higher. China Vanke , the country's largest developer by sales, climbed 1.2 percent in Shenzhen, moving further away from a near five-month low it recorded on Monday.

First Tractor Limited rose 4.1 percent in Shanghai and 2.5 percent in Hong Kong after China's Politburo discussed accelerating the development of modern agriculture at a late November meeting, spurring hopes the firm may benefit as China's smallholdings are consolidated into larger farms.

Attendees at the meeting discussed the need to optimise land use and efficiency, and to develop policies to better coordinate land management while ensuring food security and protecting the amount of arable land.

Anhui Conch Cement rose 2.8 percent in Shanghai and 1.1 percent in Hong Kong, while China State Construction Engineering soared 4.2 percent in Shanghai.

Nomura analyst Yang Luo said in a research note that while cement prices may rise further in the next two to three weeks, particularly in East China and mainly on capacity shutdowns that have limited supply and inventory levels, he expects demand growth to contract in the new year.

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Markets largely shrugged off a warning from China's President Xi Jinping in the same Xinhua article that the world's second-largest economy faces "challenges and opportunities" due to profound and complex changes" in the global and domestic environment.

"I wouldn't stand in front of the onrushing train at the moment. People clearly are eager for markets to rise more and are more focused on returns rather than the looming macro risks for the new year," Hong said.

Shanghai port-related and Chinese non-banking financial counters were buoyed by a People's Bank of China statement that the country will begin rolling out financial reforms in the Shanghai free trade zone within three months.

China's central bank on Tuesday published new rules on credit information firms, in a move to improve the country's nascent credit appraisal system to help banks better evaluate risks.

Shippers were further buoyed by rising dry bulk freight rates as the Baltic Dry Index climbed another 3.1 percent to swell to its highest since mid-October. China Shipping Container Lines soared 3.9 percent in Hong Kong and 9.9 percent in Shanghai.

ZTE Corp was up 0.4 percent in Hong Kong and 0.6 percent in Shenzhen after the official Shanghai Securities News reported that Beijing will likely issue three 4G mobile network licenses to operators including China Mobile sometime between Dec. 6 and 18.

In Hong Kong, China Mobile slipped 0.4 percent, while its smaller rival China Unicom shed 0.7 percent.

Chinese coal-related counters underperformed after the official China Securities Journal reported that China's top economic planning agency may raise energy-saving incentives, without citing its source of information.

China Shenhua Energy , the country's largest coal producer, slid 1 percent in Hong Kong and inched up 0.4 percent in Shanghai. - Reuters