HONG KONG: Onshore China shares ended a grim November on a bright note on Friday and Hong Kong neared its 2012 highs after local media reported Chinese Vice Premier Li Keqiang said urbanisation will drive most of the country's development in the next decade.
Chinese property, railway and other infrastructure-related sectors led gains on the day ahead of data due over the weekend which is expected to show that China's factory activity expanded at its fastest pace in seven months in November.
On Friday, the Hang Seng Index ended up 0.5 percent at 22,030.4, just shy of 22,149.7, the intra-day high for the year set on Nov. 2. The China Enterprises Index of the top Chinese listings in Hong Kong jumped 1.3 percent.
The Hong Kong indexes rose 1.8 and 0.4 percent in November, respectively, outshining their onshore peers for a sixth-straight month.
The CSI300 rose 1.1 percent on the day to 2,139.7, while the Shanghai Composite Index climbed 0.9 percent to 1,980.1, after slumping to its lowest closing level in almost four years on Thursday.
The indexes slid 5.1 and 4.3 percent, respectively, for the month.
"The biggest issue is how to entice domestic investors back into the A-share market again, especially since domestic fund managers are not sure if the market has bottomed," said Edward Huang, chief strategist at Haitong International Securities.
"Fund managers are beginning to think about switching out of sectors that have outperformed this year but investors shouldn't expect too much on policy reforms from China's annual central economic meeting in mid-December," Huang added.
Data from EPFR Global, a firm that tracks global fund flows and asset allocation, showed China equities had an eleventh week of net inflows last week, amid the largest equity inflows globally last week in two years, according to a Bank of America-Merril Lynch analysis.
Chinese property developers were the stand out outperformers in both the mainland and in Hong Kong on Friday.
Poly Real Estate jumped 3.3 percent in Shanghai, while China Vanke gained 3.8 percent in Shenzhen.
China Resources Land closed up 3.5 percent to HK$20.70 after briefly testing HK$21.15, failing at breaching above chart resistance seen at HK$20.85, its previous high recorded on Oct 21, 2009. It is now up 67 percent in 2012.
Chinese railway and cement counters also saw big gains on the day. China Railway Group soared 5.6 percent in Hong Kong and 5.2 percent in Shanghai.
China National Building Material rose 3.5 percent to a three-week high in Hong Kong. It is now up around 15 percent for the year.
Bucking broader market strength, China Rongsheng Heavy Industries slumped 9.3 percent in huge volume as passive investors sold shares at the close after MSCI removed the stock from its China indexes.
Hong Kong Exchange (HKEx) slipped 0.8 percent after it raised $1 billion to fund its takeover of the London Metal Exchange, but it closed above the HK$118 per share the new share issue was priced at.
A-H DIVERGENCE HITS NEW BOTTOM
The Hang Seng Index has surged around 20 percent so far this year and the China Enterprises Index has risen 7 percent, while the CSI300 has shed 12 percent.
As a result of the divergence between A and H shares performance, the Hang Seng Index A/H premium index on Friday hit its lowest close since June last year.
It has closed below 100 on all but two sessions since mid-October, suggesting the premium that onshore shares once traded over their offshore peers has been wiped out.
A contamination scare last week involving Jiugui Liquor worsened losses on the month for the group, after repeated anti-corruption calls by China's top leaders in the lead up to the 18th Communist Party Congress earlier this month put pressure on a sector that had been outperforming.
Jiugui Liquor inched up 0.2 pct on Friday, snapping a five-day losing streak that had knocked a third off its market cap since it resumed trading last Friday, after a four-day suspension following press reports alleging its products contained excessive toxic materials.
Sector heavyweight Wuliangye lost 0.9 percent on Friday, hurt by a local news report that its retail prices in China's southern Guangzhou city have fallen by 15 percent in the last six months. It ended November down 20 percent, its worst monthly performance in more than four years.
Kweichow Moutai was up 28 percent on the year at the end of October, but fell 12.7 percent in November - its worst month in more than 2-1/2-years. That trimmed its annual gain to just under 12 percent.
In a further sign of the fragility of the A-share market, which is set for a third-straight annual loss, the brokerage sector had a mixed showing on Friday despite attempts by regulators to calm fears of possible cuts in commission fees.
The China Securities Journal on Friday quoted an unidentified regulatory official as saying that no team had been set up to study fee reductions.
Several lockup expiries, along with a congested IPO pipeline that is worsening an oversupply problem in the A-share market, could condemn the A-share market to further weakness.
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