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HK, Shanghai shares fall on rate hike concern; banks down

By Donny Kwok and Farah Master HONG KONG/SHANGHAI, Nov 12 (Reuters) - Shares in Hong Kong and Shanghai posted their biggest single-day of loss in months on Friday as investors rushed to lock in gains on expectations the central bank would raise rates as early as later in the day. China's key stock index posted its biggest percentage loss in 14 months, ending down 5.2 percent, with investors dumping big cap financials while a slide in oil prices hit heavyweight resource firms. "There are rumours that tonight there will be a rise in interest rates, with the rise being 50 basis points. This prompted a large slump in commodity futures and has had a big impact on the stock market," said Zhang Gang, analyst at Central Securities in Shanghai. "I cannot say if this will actually be the case, we will all be watching for an announcement tonight," he said. Analysts and brokers were quick to blame the drop on expectations of further rate hikes by as early as Friday evening, after data on Thursday revealed China's inflation sped to a 25-month high in October and bank lending blew past expectations. The Shanghai Composite Index closed at 2,985.4, plunging below the psychological 3,000 level. The index had risen 1 percent on Thursday, when it surged in intraday trade to near levels not seen since January. Sinopec Corp was the biggest drag on the index, falling 3.3 percent after a volatile session. PetroChina slid 1.6 percent after trading up more 1 percent. Oil fell $2 a barrel to below $86, retreating from a 25-month high reached in the previous session, as concern about Irish debt boosted the dollar. Financials slumped, with Minsheng Bank down 5 percent. Industrial and Commercial Bank of China dropping 1.9 percent and heavyweight Agricultural Bank of China sliding 2.9 percent. Shanghai's sub-property index fell 6.4 percent. Volume surged to near multi-year highs, jumping to 296.8 billion yuan ($44.92 billion) from 286.1 billion yuan on Thursday. HONG KONG FALLS In Hong Kong, the Hang Seng Index fell 1.93 percent, the biggest single-day percentage loss in more than four months. The index closed 477.72 points lower at 24,222.58, ending the week down 2.6 percent, its biggest weekly decline in three months. Turnover was a heavy HK$127.2 billion, its highest in more than a week.

The China Enterprises Index of top locally listed mainland companies fell 3.02 percent. "The market underwent a consolidation and investors locked in gains on concern about further monetary tightening in China," said Linus Yip, strategist at First Shanghai Securities. "Some 400 points drop did not seem much as the index rose an aggregate 1,800 points last week." Brokers said the market was undergoing a "healthy" correction and expected the underlying tone to remain positive because of ample liquidity in the market. "There is no change in fundamental as reflected in the steady Hong Kong dollar," said Patrick Yiu, a director at CASH Asset Management. "Bulllish tone still remains in ample liquidity." Financials stocks were under pressure with AIA losing 4.3 percent, China Life fell 3.8 percent after news that Singapore's Temasek Holdings would raise its stake in the Chinese lender by taking up Bank of America Corp's entire entitlement to the CCB's rights issue. ($1=6.629 Yuan) (Editing by Kazunori Takada) ((donny.kwok@thomsonreuters.com; +852 2843 6470; Reuters Messaging: donny.kwok.reuters.com@reuters.net)) ASIA-PACIFIC MARKETS Pan-Asia...... Japan........ S.Korea.... S.E. Asia............ Hong Kong... Taiwan..... Australia/NZ......... India....... China...... OTHER MARKETS: Wall Street........... Gold......... Currency.. Eurostocks........... Oil...........

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