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Hong Kong shares creep higher, China shipping sector gains

Clement Tan
Friday, 29 Nov 2013 | 12:15 AM ET

* HSI +0.3 pct, H-shares +0.5 pct, CSI300 flat

* Set for November gains, H-shares outperform A-shares

* Chinese shippers buoyed by reported plan to rejuvenate industry

HONG KONG, Nov 29 (Reuters) - Hong Kong shares crept higher early on Friday, with mainland markets again tepid and the Chinese shipping sector buoyed by surging dry bulk rates and media reports that a plan to rejuvenate the industry has been submitted to the State Council for approval.

Both markets are set for November gains ahead of the release of China's official manufacturing purchasing managers index over the weekend. The official survey is expected to reinforce signs that the world's second-largest economy is pasing through a modest slowdown toward the year end.

At midday, the Shanghai Composite Index and the CSI300 of the leading Shanghai and Shenzhen A-share lsitings were both flat. On the month, they are up 3.7 and 2.8 percent, respectively, after losses in October.

The Hang Seng Index rose 0.3 percent to 23,864.1 points and is now up 2.8 percent in November. The China Enterprises Index of the top Chinese listings in Hong Kong climbed 0.4 percent to bring its monthly gain to 7.6 percent -- its biggest in 11 months.

H-shares have been trading at about 6 percent premium over A-shares for two weeks now, with the outperformance accelerating after Beijing unveiled the details of its reform agenda late on Nov. 15.

"The A share underperformance hasn't quite affected Hong Kong markets yet, but that may change if A-shares continue to stay weak like this," said Jackson Wong, Tanrich Securities' vice-president for equity sales.

"Late cyclicals such as coal and now shipping have been climbing, so it may suggest the initial stage of the rally is now on its last legs and we will need new catalysts from either China data or reform details," Wong added.

On Friday, China Rongsheng spiked 4.6 percent in Hong Kong and Changjiang Shipping Group 5.2 percent in Shenzhen after media reports that a senior tranportation ministry official told reporters at a shipping conference that a national strategic plan to rejuvenate the sector was submitted last week to the State Council for approval.

China Shipping Container Lines jumped 5 percent in Hong Kong and 2.3 percent in Shanghai after the Baltic Dry Index, a measure of commodity shipping costs, surged 9.3 percent in its biggest single day rise in 2-1/2 months.

FINANCIAL REFORM DISTORTS MARKETS

Chinese non-banking financials have surged this month on hopes financial reforms will considerably boost their bottom line, as would an impending resumption of initial public offering approvals.

Ping An Insurance shares climbed 0.8 percent in Hong Kong and 0.3 percent in Shanghai on the day, and are up 18.6 percent and 13 percent on the month respectively.

Its H shares are now trading at the biggest premium over its A shares among dual-listed blue chips, suggesting that domestic Chinese investors are reluctant to return to large cap names.

Monetary conditions in the mainland have tightened further, causing a surge in government and corporate bond yields. The market has begun pricing in interest rate reform, a development that would make borrowing more expensive and could hinder China's fragile economic recovery.

In comments reported by the Securities Times, Xiao Gang, the head of the China Securities Regulatory Commission said an amendment to the Securities Act to protect investors will be submitted to the National People's Congress for approval.

Another official told the official Shanghai Securities News that the regulator will support the sale of preferred shares and bonds, that are coupled with write-down provisions by commercial banks, as a way for companies to raise capital.