Shanghai stocks rise; HK cautious ahead of land auction

Trade the News

Wednesday August 18, 2010 07:29:05 AM GMT

* Property stocks push Shanghai Composite Index higher

* HSI tests 200-day moving average, land auction eyed

* Banks, local property companies lower in Hong Kong

* Turnover falls in Hong Kong amid investor caution (Updates to midday)

by Vikram S.Subhedar and Farah Master

HONG KONG/SHANGHAI, Aug 17 (Reuters) - China's key stock index extended gains on Tuesday morning, boosted by property developers, which rose as fears of further policy measures to curb prices continued to wane.

The Shanghai Composite Index was up 0.2 percent at 2,668.0 points and poised for its biggest three-day gain in just over a month, rebounding from a 3 percent slide in the previous week.

"The fear of further policy tightening is taking a backseat at the moment," said Louis Wong, research director at Hong Kong-based Phillip Securities.

Resurgent liquidity after a flurry of fundraising by banks, and improving investor appetite for Chinese shares has lifted the Shanghai Composite more than 15 percent since its July low.

The index lost almost a quarter of its value over the second quarter after Beijing moved to rein in property speculation, stirring fear that harsh tightening would lead to a sharp economic slowdown.

Those fears seemed to be easing, analysts said.

"Attitudes towards property controls have started to stabilise," said Guo Yanling, analyst at Shanghai Securities.

Shanghai's property sub-index rose 1.3 percent.

Heavyweight developer Gemdale Corp gained 0.6 percent, while China Vanke Co Ltd rose 1.4 percent.

A stellar debut from Jihua Group Corp Ltd, which rose 76.3 percent on Monday, and rising market turnover also indicated that investors were more confident about buying back into the market.

Large caps including China COSCO Holdings Co Ltd, the country's premier shipping conglomerate, rose 1 percent, after it said it expected to post a net profit for the first half of the year.

HONG KONG SHARES EASE

The Hong Kong market traded slightly lower on Tuesday morning, with volume falling slightly as investors awaited the outcome of a land auction later in the day.

The benchmark Hang Seng Index was 0.16 percent lower at 21,078.4 by the midday trading break.

"The index is lacking clear direction. We are seeing the same in the United States and that is having an impact," said Phillip Securities' Wong, adding that a rally in mainland shares should lend some support.

The results of Tuesday afternoon's land auction will test demand for new property developments after the authorities announced a series of measures to cool prices that were headed for historic highs.

The property sub-index, which on Monday slumped 2.8 percent, was little changed on Tuesday, with weakness in local developers Wharf (Holdings) Ltd and Henderson Land Development Co Ltd offsetting gains in China-focused property companies.

China Overseas Land & Investment Ltd was up 1 percent, while New World Development Co Ltd rose 0.8 percent.

With correlations between U.S. benchmark stock indexes and the Hang Seng Index still high, a flat close on the S&P 500 in very light volume played through to Hong Kong.

The technical outlook for the Hang Seng Index points to further downside with a popular momentum indicator, the moving average convergence-divergence, turning bearish recently.

The index is testing strong near-term support at its 200-day moving average, currently at 21,026.78. (Editing by Chris Lewis)

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