China stocks gain on signs tight liquidity is easing; Hong Kong also up – Reuters

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* SSEC +0.7 pct, CSI300 +1.0 pct, HSI +0.9 pct

* Tight seasonal liquidity has weighed on investor
confidence

* Stock regulator says would be happy for MSCI index
inclusion

* Nationwide home prices remain robust but fading in top
cities

SHANGHAI, June 19 China stocks rose on Monday on
signs that tight liquidity conditions were easing and as fewer
new listings were expected to come onto the market.

The CSI300 index rose 1.0 percent to 3,552.05
points by the end of the morning session, while the Shanghai
Composite Index gained 0.7 percent to 3,143.77.

Traders said liquidity conditions improved as the central
bank continued to provide funds via open market operations,
after injecting a net 410 billion yuan into money markets last
week, the biggest weekly injection since mid-January.

Liquidity typically tightens in China’s financial system in
June due to tax payments and as banks look to make their books
look better for the end of the month and quarter. But the
seasonal pinch has been compounded this year by a regulatory
clampdown on riskier forms of financing which has been banks
hoarding more cash than usual.

Still, authorities appear to have paused their campaign in
recent weeks, possibly due to concerns over liquidity or perhaps
an indication that they are assessing earlier policy steps to
see if they are starting to slow the real economy, as many
analysts predict.

“Liquidity conditions have eased as the government has
recently decreased its focus on tightening financial
regulations,” UBS Securities wrote in a report.

Expectations of fewer new listings also supported Chinese
stocks on Monday, particularly small-caps whose valuations had
been pressured by worries of more equity supply.

China’s securities regulator approved six initial public
offerings (IPOs) that aimed to raise a combined total of up to
3.4 billion yuan ($499.22 million). It was the fourth straight
week that the pace had slowed down from an average of around 10
IPOs in the past months.

Chinese investors are also awaiting a decision by U.S. index
provider MSCI, which will decide on June 20 whether to include A
shares in its Emerging Market Index.

The stock regulator said it would be happy for MSCI index
inclusion, but Chinese capital market reform will not be
derailed without the inclusion.

“The inclusion could bring about 60.7 billion yuan into the
(A-share) market, but the impact would be limited if the
inclusion does not happen,” Haitong Securities wrote.

Sectors rallied across the board, led by financial
and consumer stocks.

Real estate stocks gained 0.7 percent, after
data showed China’s month-on-month home price growth remained
robust in May, rising 0.7 percent nationwide despite a string of
cooling measures across the country.

Still, monthly price rises largely stalled in the country’s
biggest cities such as Beijing and Shanghai.

Hong Kong stocks follow other Asian markets higher, shaking
off Wall Street’s uninspiring performance on Friday.

The Hang Seng index rose 0.9 percent to 25,868.02
points.

The Hong Kong China Enterprises Index gained 1.4
percent to 10,527.48.
($1 = 6.8106 Chinese yuan renminbi)

(Reporting by Luoyan Liu and John Ruwitch; Editing by Kim
Coghill)