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 November 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.
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 October 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 take-over of the London Metal Exchange, but it closed above the HK$118 per share the new share issue was priced at.
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 around 9 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 big part of November's weakness in onshore markets stemmed from the alcohol sector. 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.