China shares outperform Asia, spur Hong Kong's 5th straight gain

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China stocks rose on Wednesday, outperforming Asian peers and spurring Hong Kong gains, bolstered by comments from the country's securities regulator encouraging companies with strong cash positions to buy back some of their shares.

The comment from the China Securities Regulatory Commission (CSRC), first reported by the official Xinhua news agency late on Tuesday, marked Beijing's latest effort to boost investor confidence as mainland markets hover at 41-month lows.

Expectations of more policy "fine-tuning" in the second half to support economic growth underpinned gains, after official media late on Tuesday reported that Premier Wen Jiabao reiterated Beijing's intention to stablize growth.

"It's all about sentiment today. We've seen the same show from CSRC before, but companies make the decision to buy back shares, not the regulator," said Hong Hao, Hong Kong-based chief equity strategist with Bank of Communications International Securities.

Hong said he wasn't expecting too much from Wen's comments "since the wording on growth is 'stablize' and not 'stimulate.' Besides, Beijing hasn't quite followed through so far after saying so much, except on the property sector."

The Shanghai Composite Index rose 0.9 percent, rebounding from Tuesday's close, the lowest since March 3. The CSI300 Index of the largest Shanghai and Shenzhen listings gained 1.1 percent, while benchmarks for Japan and South Korea closed down for the day.

The China Enterprises Index of the top Chinese listings in Hong Kong climbed 0.9 percent, while the Hang Seng Index gained 0.1 percent to record a fifth-straight daily gain and remain above its 200-day moving average, a technical level it has struggled with since mid-May.

Turnover in Hong Kong hit its highest since June 15, while volume in Shanghai remained lackluster, some 11.5 percent below its 20-day moving average.

Wen's comments came ahead of two surveys on Wednesday that continued to show sluggish pace of factory activity growth in July in the world's second-largest economy.

WHEN WEN WAXES, MARKETS MOVE

Leading Wednesday's climb in mainland Chinese indices were the more growth-sensitive stocks. PetroChina Co Ltd rose 0.6 percent, while top mainland coal producer China Shenhua Energy Co Ltd gained 0.7 percent.

Wen's comments also spurred strength in the railway sector. China Railway Construction gained 3 percent in Shanghai and 2.2 percent in Hong Kong. In 2012, the stock is up 27 percent in Shanghai and more than 60 percent in Hong Kong.

The Macau gambling sector reversed midday losses after data showing gambling revenue in the former Portuguese territory inched up 1.5 percent in July from a year ago, bettering expectations of a flat or a 1 percent decrease.

Wynn Macau jumped 4.4 percent, while SJM Holdings gained 3.8 percent.

Huaneng Power reversed midday gains to close down 1.2 percent in Hong Kong, barely denting its 35.4 percent gains for the year to date after reporting better-than-expected first half net profit after markets closed on Tuesday.

Prior to Wednesday, Huaneng Power was trading at 10.6 times forward 12-month earnings in Hong Kong, a 17 percent discount to its historic median, according to Thomson Reuters StarMine.

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