China shares outshine Asia, lift Hong Kong to near 2012 highs

Clement Tan

(Updates to midday)

* HSI +0.2 pct, H-shares -0.4 pct, CSI300 +0.3 pct

* Esprit at lowest since August after fund raising plan announced

* China Coal climbs further after in-line Q3 earnings

* HKEx hits 6-mth high after HKMA intervened again to stem HKD strength

HONG KONG, Oct 24 (Reuters) - Mainland Chinese shares rose on Wednesday, outperforming most Asian peers and lifting the Hong Kong market to just short of a year-high after a survey of purchasing managers showed China's economy making a steady recovery.

The Hang Seng Index ended the morning session up 0.2 percent at 21,736.5, below the current intra-day 2012 high of 21,760.34 recorded on Feb. 29. If it holds onto gains at the close, this will be the benchmark's ninth-straight daily gain, equalling a winning streak recorded in June 2010.

The China Enterprises Index of the top Chinese listings in Hong Kong was down 0.4 percent.

The CSI 300 Index of the top Shanghai and Shenzhen listings rose 0.3 percent, while the Shanghai Composite Index gained 0.4 percent. Both traded in the same 70-point range they have been trading between for more than two weeks.

A rise in the HSBC Flash Manufacturing Purchasing Managers Index for China to a three-month high of 49.1 in October with gains in new orders and output helped bolster confidence in the world's second-largest economy.

``Talking to my clients, it seems their pessimism on China is ebbing,'' said Edward Huang, equity strategist with Haitong International Securities.

``Incoming fund flows are sure to further buoy Hong Kong markets further, with local developers and Chinese construction-related plays likely to see further short-term buying interest,'' Huang added.

China Coal Energy Co Ltd rose 2.2 percent in Hong Kong and 0.6 percent in Shanghai after a 22 percent decline in third-quarter net profit was largely in line with expectations.

After lagging the broader Hong Kong market for much of this year, shares of China's second-largest coal producer are now up almost 11 percent in October after jumping almost 10 percent in September.

It is now down 6.3 percent for the year, compared to the Hang Seng Index's 18 percent gain and the China Enterprises Index's 7.7 percent rise. China Coal currently trades at a 47 percent discount to its historic median price-to-book value, according to Thomson Reuters StarMine.

Expectations of more capital flows into Hong Kong lifted shares of the Hong Kong Exchange, which rose 2.2 percent to its highest since late April. Shares of the bourse operator have now gained 9.6 percent this month after jumping 13.8 percent in September.

The territory's defacto central bank was forced to step into the currency market twice on Tuesday to weaken the Hong Kong dollar, following a similar move over the weekend after it pushed against the top-end of its trading band.

The Hong Kong property sector was also strong, with Cheung Kong Holdings and Sun Hung Kai Properties each jumping almost 3 percent.


Weakness in fashion retailer Esprit Holdings limited gains in Hong Kong. Esprit plunged 12.4 percent after it announced plans to raise $677 million to fund a restructuring of its key businesses.

This involves a new share issue, which, at HK$8 per share, is a 36 percent discount to its Monday's close. Hong Kong markets were closed for a public holiday on Tuesday. Esprit shares are currently trading at HK$12.38.

Losses on Wednesday brought Esprit's share price to its lowest since Aug. 6, almost paring gains after the company appointed an executive from larger rival Inditex as its new CEO.

Chinese oil majors were also key drags on lower oil prices. In Hong Kong, CNOOC Ltd slipped 1.6 percent, while PetroChina lost 1.8 percent and China Petroleum & Chemical Corp (Sinopec) shed 1.4 percent.

(Editing by Sanjeev Miglani)