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Mainland companies lead Hong Kong shares higher before MSCI verdict

HONG KONG (Nikkei Markets) -- Hong Kong shares headed for its fourth advance in five days, led by Chinese companies before MSCI's decision this week on the inclusion of A-shares in its benchmark indexes.

The Hang Seng Index rose 0.9% to 25,868.02 by midday, its best gain since May 9. Geely Automobile Holdings rose 3.3% after S&P Global Ratings raised its credit outlook to positive from stable, saying its parent Zhejiang Geely is expected to continue improving credit metrics while achieving sustained volume and revenue growth. Paper-products maker Hengan International Group was the top performer on the gauge, climbing 5.4% after underperforming the broader market this year.

Ping An Insurance Group and China Life Insurance rose at least 1.7% to pace a 1.4% advance for the Hang Seng China Enterprises Index. The gauge, also called the H-share index, has underperformed the Hang Seng Index so far this year, as concerns about policy tightening weighed down mainland Chinese equities.

The equity gains in Hong Kong coincided with broad advances across the region, with the Nikkei Asia300 Index climbing 0.6%. Investors are waiting for to see whether MSCI will this year decide in favor of including China's A-shares in its global benchmarks, which are tracked by money managers with hundreds of billions of dollars in assets. MSCI, which had decided against their inclusion in the previous three years, will announce its verdict early Wednesday in Asia.

"Our focus is mainly on possible MSCI inclusion for A-shares," said Steven Leung, executive director at UOB-Kay Hian in Hong Kong. "Today's performance is better-than-expected. We don't see any particularly good news in the market, but overall in Asia markets are doing pretty well."

Analysts at Jefferies wrote in a note released Monday they see a 75% chance of A-shares' inclusion in the MSCI benchmarks this year.

Leung also attributed the day's gains in Hong Kong to the People's Bank of China's cash injections into mainland money markets. China's central bank will inject 120 billion yuan ($18 billion) on Monday, adding to a net infusion of 410 billion yuan last week, Reuters reported, citing traders.

The Shanghai Composite added 0.7%, increasing its gains in 2017 to 1.3%. The Hang Seng Index has climbed almost 18% this year, while the H-share index has risen 12%.

Average new home prices across 70 major Chinese cities rose 0.7% in May from a month ago, according to Reuters's calculations based on National Bureau of Statistics (NBS) data. Chinese property companies are better-positioned now to deal with tougher conditions than during downturns in 2011 and 2014, S&P said in a statement released Monday.

Meanwhile, Hong Kong lenders are better prepared than in 1997 to weather a crash in the property market even after policy makers introduced various mortgage tightening measures recently, South China Morning Post reported, citing Hong Kong Monetary Authority's Chief Executive Norman Chan. A gauge of property companies listed in the city rose 0.9% Monday.

Internet giant Tencent Holdings rose 1.3%. Zhong An Online Property and Casualty Insurance, whose shareholders include Tencent and Alibaba Group Holding affiliate Ant Financial, could list its shares in Hong Kong as early as July after raising up to $2 billion in an initial public offering, local media cited mainland news reports as saying.

Man Wah Holdings fell 2.6% after Muddy Waters Research published a report Friday, further questioning the furniture maker's profitability and accounting practices. Man Wah responded by saying the allegations were the same as the short-seller made earlier, and which the company had previously addressed. The company's shares rose 8.4% Friday after it bought back 1 million shares.

Muddy Waters is prepared for a long struggle over the furniture maker, The Standard reported Monday, citing its founder Carson Block.

Cosco Shipping Holdings rose 1.2% in Hong Kong. The company said trading in its Shanghai-listed shares will remain suspended for not more than a month and that there were "great uncertainties" related to a material asset restructuring. Trading in Cosco's A-shares was suspended last month.

China Shenhua Energy rose 1.5% in the city. Trading in the coal producer's A-shares has been halted since June 5, pending an announcement.

EPI (Holdings) jumped 7.9% to HK$0.410 after the petroleum exploration company said it plans to place up to 651 million new shares at HK$0.308 apiece.

Coastal Greenland rose 5.4% after saying it expects a consolidated profit for the year ended March 31 as compared to a loss the year before.

-- Suzannah Benjamin and V. Phani Kumar

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