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Shanghai shares fall to lowest in a month, Hong Kong weaker too

Clement Tan
Friday, 25 Oct 2013 | 12:50 AM ET

* HSI -0.5 pct, H-shares -1.3 pct, CSI300 -0.8 pct

* Margin issues hit Great Wall Motor despite Q3 sales gap

* ChiNext Composite Index set for worst week in 11 months

* Earnings coming for CCB, China Life, Ping An Insurance

HONG KONG, Oct 25 (Reuters) - Shanghai shares sank to their lowest in a month on Friday, weighing on Hong Kong markets, as investors were driven more by a desire to exit this year's outperformers than by fear of tighter money in the mainland.

The biggest drag on the CSI300 index of the leading Shanghai and Shenzhen A-share listings was Great Wall Motor , which dived after reporting a fall in third quarter margins.

At midday, the Shanghai Composite Index was down 1 percent at 2,381 points, its lowest intra-day level since Sept. 6. The CSI300 sank 0.8 percent. For the week, they were down 2.3 and 1.9 percent, respectively.

The Hang Seng Index slipped 0.5 percent to be down 2.7 percent this week. The China Enterprises Index of the top Chinese listings in Hong Kong sank 1.3 percent was down 4.3 percent.

A rebound in the Chinese banking sector limited losses in the mainland, as domestic investors were less concerned than others about the money market situation after the seven-day repo rate opened largely unchanged on Friday.

"Jitters over the money market has kind of subsided for now, so funds are resuming their rotation out of the year's outperformers into the large caps," said Guo Yanling, a Shanghai-based analyst with the brokerage Shanghai Securities.

"They are taking cues from the ongoing third quarter result reporting season for those likely to disappoint on a full-year basis, particularly among the small caps," she added.

The Nasdaq-style ChiNext of mainly high growth, technology start-ups listed in Shenzhen dropped 2.2 percent to its lowest since mid-September. While it is still up 65 percent on the year, the ChiNext board has fallen 5 percent this week - its biggest weekly drop in 11 months.

There were also losses for stocks seen benefiting from the launch of the Shanghai free trade zone, which surged in August and September.

Shanghai Waigaoqiao, which manages one of the four existing bonded zones that form the new entity, plunged by the 10 percent limit after announcing plans to place 2.7 billion yuan ($444 million) worth of new A-shares.

Shares of Great Wall Motor, China's biggest manufacturer of sports utility vehicles, dived 9.3 percent in Shanghai and 6.1 percent in Hong Kong. The company's drop in margins from the second quarter came in spite of improved sales.

While the Chinese banking sector was broadly weaker in Hong Kong, it was stronger in the mainland, with mid-sized Industrial Bank up 2.5 percent and Huaxia Bank 1.7 percent.

The sector may be in focus in the afternoon, in the wake of China launching a new benchmark lending rate, or "loan prime rate", intended to guide commercial banks in setting interest rates when lending to their best customers.

China Construction Bank was flat in Shanghai and down 0.9 percent in Hong Kong ahead of its quarterly earnings, expected on Sunday.

Other quarterly earnings due later on Friday include subway equipment manufacturer CSR Corp and the two biggest Chinese insurers, China Life Insurance and Ping An Insurance .

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