* HSI +0.2 pct, H-shares +0.3 pct, CSI300 +0.9 pct
* Mid-sized banks rise after comments by officials
* Vanke leads property rise on owner’s reported stake purchase
* Not time to bargain hunt, Shanghai Comp could hit 1,600 - BoComm
By Clement Tan
HONG KONG, March 11 (Reuters) - Hong Kong and China shares rebounded early on Tuesday, led by some mid-sized bank stocks on expectation the country’s annual parliamentary session will not unveil more aggressive reforms that could trim margins or restrict their lending.
But gains came in lackluster volumes, suggesting investors remain jittery after an index of large cap stocks listed in the mainland hit a five-year closing low on Monday. Some investors are advising investors to watch the commodities market, with Shanghai steel futures still languishing near record lows.
At midday, the CSI300 of the largest Shanghai and Shenzhen A-share listings was up 1 percent, while the Shanghai Composite Index rose 0.3 percent to return above the 2,000-point level at 2,005.3 points.
The Hang Seng Index rose 0.2 percent to 22,305.2 points, with resistance seen at its 200-day moving average at about 22,465.2. The China Enterprises Index of the leading offshore Chinese listings in Hong Kong inched up 0.3 percent.
Gains came in the weakest midday Shanghai volumes and Hong Kong turnover in about a month.
Senior Chinese finance officials spoke at the National People’s Congress on Tuesday morning, and “everything they said was within expectations,” said Jackson Wong, Tanrich Securities’ vice-president for equity sales. “I think we are also due for a small bounce after the selloff yesterday.”
China Vanke jumped 4.6 percent in Shenzhen, leading gains for property developers listed in the mainland. The official China Securities Journal reported the company’s president bought one million shares in the secondary market as its shares hit five-year lows in late February.
Tencent Holdings climbed 1 percent after the Chinese internet giant was cited as among the companies in an official People’s Daily report on Tuesday that have been approved to participate in the project.
The governor of the People’s Bank of China said on Tuesday that the country’s deposit rates are likely to be liberalised in one to two years - the most explicit timeframe to date.
Mid-sized lenders broadly outperformed larger rivals. China Minsheng Bank rose 1.6 percent in Shanghai and 1 percent in Hong Kong. Industrial and Commercial Bank of China sank 1.2 percent in Shanghai and was flat in Hong Kong.
There was no explicit talk about monetary policy on Tuesday. Data released after markets shut on Monday showed new yuan loans made by Chinese banks halved in February and liquidity in the economy tightened.
Total social financing, a broad measure of liquidity and credit, fell sharply to 938.7 billion yuan from January’s 2.58 trillion yuan, suggesting Beijing’s fight against shadow banking is gaining steam.
In a note dated Tuesday, Hong Hao, Bank of Communication International’s equity strategist, said to expect “more bad news” in the days ahead and that it was premature to call a bottom to the slide in the mainland market after the Shanghai Composite slipped below the 2,000-point level on Monday.
He pointed to the 8.3 percent tumble in iron ore prices on Monday, its second-worst on record, suggesting there have been margin calls on structural financing margins and oversupply could still worsen.
“It’s still too early to be bargain hunting at this point,” Hong said. “In volatile markets, people think banks are the last line of defence given their low valuations, but their valuations could fail to hold.”
The Shanghai Composite Index currently is trading at around 9 times earnings, which Hao says is “still 15 to 20 percent too high relative to previous (market) bottoms”,which would point to a bottom of around 1,600 to 1,800 points this time.