* HSI -0.1 pct, H-shares -0.4 pct, CSI300 +0.6 pct
* Institutional investors buy into undervalued blue-chip shares
* Merger and acquisitions plans of SOEs attract funds
* Hong Kong shares fall on profit-taking, but see resistance
By Chen Yixin and Pete Sweeney
SHANGHAI, Nov 3 (Reuters) - China shares hit a multi-month high on Monday, supported by sustained strength in blue-chip brokerages and steel firms, while Hong Kong markets fell as profit-taking emerged after the recent solid gains.
The Shanghai Composite Index rose 0.6 percent to 2,435.0 points by the midday break, the highest level since February last year, while the CSI300 of the leading Shanghai and Shenzhen A-share listings gained 0.6 percent, hitting a 14-month high.
“I can see some institutional investors start to buy into undervalued blue-chips, including brokerages and steel shares, given supportive government policies and merger and acquisitions among stated-own enterprises,” said Xiao Shijun, analyst at Guodu Securities in Beijing.
Guangzhou Shipyard International Ltd soared its 10 percent daily limit in the mainland market and 58.8 percent in the Hong Kong market as the company said on Friday that it would buy Huangpu Wenchong yard, which builds military and marine engineering vessels, from its parent China State Shipbuilding Corp for 4.53 billion yuan ($741 million) via share issuance and cash.
The share will be eligible for trading on the forthcoming stock connector between Hong Kong and Shanghai, and will become the first military industry-related firm with a dual listing.
Almost all brokerages gained on Monday, with Industrial Securities Co gaining 5.1 percent and Haitong Securities Co up 1.1 percent.
Maanshan Iron & Steel Company and SGIS Songshan hit their 10 percent daily limit.
In Hong Kong, profit-taking dragged the index lower, with the Hang Seng Index down 0.1 percent at 23,973.82 points and the China Enterprises Index of the top Chinese listings in Hong Kong down 0.4 percent.
Analysts said the market was meeting resistance as Hang Seng index neared its 50-Day Moving Average.
“Investors have taken some profits from last week’s gain,” said Sam Chi Yung, strategist at Delta Asia Financial Group in Hong Kong. “There was also some impact from Japan and Europe’s QE (Quantitative Easing) programmes, but the influence is very limited.”
Standard Chartered Plc plunged 2.3 percent to its lowest level since mid 2009, after the company was placed under investigation by U.S. authorities for potential sanctions violations connected to its banking for Iranian-controlled entities in Dubai.
Mengniu Dairy extended gains from last week after Danone SA announced that it would buy a 25 percent stake in Mengniu’s Yashili International Holdings Ltd for $550 million. (1 US dollar = 6.1168 Chinese yuan) (Additional reporting by Shanghai Newroom; Editing by Simon Cameron-Moore)