September 13, 2016 / 4:46 AM / 2 years ago

Hong Kong stocks rebound, China down despite upbeat data

* SSEC -0.2 pct, CSI300 -0.2 pct, HSI +0.8 pct

* Dovish remarks from Fed official eases rate hike fears

* China investors brush off upbeat industrial, retail sales data

SHANGHAI, Sept 13 (Reuters) - Hong Kong stocks rebounded on Tuesday morning following a sell-off the day before, as global markets steadied after dovish remarks from a U.S. central bank policymaker eased fears of an imminent interest rate hike.

But China stocks continued to weaken, with investors shrugging off upbeat economic data that pointed to some success in Beijing’s stimulus efforts.

The Hang Seng index added 0.8 percent, to 23,482.47 points by the lunch break, while the Hong Kong China Enterprises Index gained 0.5 percent, to 9,703.57. The market slumped more than 3 percent on Monday, posting its biggest single-day fall in seven months, on fears the U.S. Federal Reserve would raise rates as early as next week.

Such concerns eased, however, after the Federal Reserve’s Board Governor Lael Brainar said on Monday she wanted to see a stronger trend in U.S. consumer spending and evidence of accelerating inflation before the central bank raises rates.

“Investors are at a loss, with hawkish remarks one day, and dovish remarks the following day,” said Alex Wong, Hong Kong-based director at Ample Finance Group.

“But I would say the panic is over. Most investors now adopt

a wait-and-see attitude.”

Pointing to the risks of a further correction, UBS strategist Lu Wenjie described the strong rally in Hong Kong stocks in recent weeks - fuelled by mainland money inflows - as “fragile” and “liquidity-driven”.

“Next one to two quarters, we think the risk is to the downside as global investors may exit the hunt for yield/carry trade in emerging markets as the U.S. Fed’s talk turns more hawkish,” Lu wrote in his latest strategy report.

But Chinese money flows into Hong Kong will be sustainable over the long term, he said.

All main sectors rose in Hong Kong, with IT stocks leading gains.

In China, the CSI300 index fell 0.2 percent, to 3,255.33 points, while the Shanghai Composite Index also lost 0.2 percent, to 3,016.54 points.

China’s industrial output grew at the fastest pace in five months in August, while retail sales also beat expectations.

“The delayed impact of earlier policy easing means that a stronger second-half to this year is likely,” wrote Julian Evans-Pritchard, China economist at Capital Economics.

“Admittedly, with further monetary easing unlikely in the near term, this uptick in economic activity is likely to fizzle out going into next year.”

Reporting by Samuel Shen and John Ruwitch; Editing by Jacqueline Wong

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