China shares rallied early on Wednesday, supporting Hong Kong, as investors chased gains in non-banking financial and railway companies spurred by official comments that raised hopes for their future earnings.
But gains were not accompanied by a broad spike in volume, which has been falling since a strong rally early last week in reaction to Beijing's bold reform agenda. Benchmark indexes in both markets have been range-bound since then.
At midday, the CSI300 index of the leading Shanghai and Shenzhen A-share listings was up 1.0 percent, while the Shanghai Composite Index rose 0.7 percent. Gains returned both to the top end of a 35-55 point range they have been bound in since last week. The Hang Seng Index rose 0.5 percent to 23,809.8 points, still just shy of the year's intra-day high at 23,944.7. The China Enterprises Index of the top Chinese listings in Hong Kong climbed 0.8 percent.
"People are taking their time. They are not in a hurry to get back into the market in a big way yet," said Larry Jiang, chief investment strategist at Guotai Junan International Securities.
On Wednesday, "old" Chinese economy plays such as coal and cement in Hong Kong were buoyed by the prospect of rising physical prices and higher seasonal demand in the mainland.
China National Building Material jumped 3.8 percent to its highest since late May, while China Coal Energy rose 2.4 percent.
Chinese railway companies were buoyed by comments from Premier Li Keqiang reported by the official Xinhua news agency that China will help connect Hungary and Serbia by rail, spurring hopes that Chinese rail equipment and construction companies may earn new contracts.
Those listed in onshore markets posted bigger percentage gains. In Shanghai, CSR Corp jumped 3.9 percent, while China Railway Construction climbed 2.9 percent. Chinese brokerages led a late-morning acceleration of gains. Citic and Haitong Securities, the mainland's two largest listed brokerages, each rose more than 2 percent in Shanghai.
In Hong Kong, Citic spiked 3.2 percent, while Haitong climbed 1.8 percent, adding to their recent outperformance that has widened the premium they now trade over their A-share listings.
The website of the official China Securities Journal reported the central bank governor Zhou Xiaochuan as saying that China should further increase foreign institutional investor quotas "when conditions are ripe". While this was largely a repeat of comments Zhou and other senior officials made last week, they have raised expectations that financial reforms involving interest rate reforms, capital account accountability, and yuan convertibility among others may happen at a faster than expected pace.
Chow Tai Fook spiked 2.1 percent after posting a forecast-beating 92.3 percent surge in net profit for the six months that ended in September, while declaring an interim dividend of HK$17 per share.