Hong Kong and China stocks closed higher on Wednesday in light trading with Chinese insurers leading gains although a slump in shares of European retailer Esprit limited the benchmark's move higher. The Hang Seng index ended t he day up 0.8 percent while the China Enterprises index of top locally listed mainland firms rose 1.5 percent.
Esprit Holdings shares fell more than 21 percent, their sharpest drop in 14 years, after the resignation of the company's chief executive which cast a cloud on the company's restructuring plan.
Shares of Esprit were actively traded among Hang Seng constituents despite being suspended after the midday break with more than six times the 30-day daily average volume changing hands in the morning session. Despite the losses, Esprit shares are still up 42.7 percent from their September 2011 lows and some brokerages including Credit Suisse warned investors against bargain hunting in the stock till there was more clarity on management.
Apart from Esprit, however, trading activity remained light as uncertainty over Spain's bank bailout plan as well as the weekend's election in Greece continues to keep investors on the sidelines and largely risk averse. "Early in the day there was little follow-through to the bounce in overnight markets but the spike in Shanghai in the morning helped reverse fortunes," said a Hong Kong-based trader at an American brokerage. "But volumes remain pitiful as investors continue to sit on their hands," said the trader.
On the mainland, the Shanghai Composite rose 1.3 percent while the large-cap focused CSI300 was up 1.6 percent with insurers the biggest boosts for the benchmarks after reports in local Chinese media said regulators were weighing expanding investment options for insurers.
"Following a meeting of China Insurance Regulatory Commission officials in Dalian this Monday and Tuesday, there has been increased speculation that the much anticipated revision to the insurers' investment guidelines will soon be announced," said Stanley Tsai, analyst at KBW in a note. China Life, the nation's largest insurer by market-cap, rose 7.2 percent while China Ping An rose 6.5 percent. CPIC rose 6.7 percent. China Life's Hong Kong listing rose 3.7 percent and was the top gainer on the Hang Seng. Rival Ping An rose 2.6 percent.
HSBC shares were the top boost for the Hang Seng, closing up 1.6 percent after the overnight rally in European banks. Goldman Sachs maintained its "buy" rating on HSBC, saying it preferred the bank to rival Standard Chartered for turning its focus to fast-growth markets. Goldman has a "neutral" rating on Standard Chartered. Standard Chartered shares rose 1.7 percent but are down 2.6 percent in the year-to-date, underperforming HSBC's 11 percent rise.
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