SHANGHAI (Reuters) - Shanghai's stock index reached a multi-year high on Tuesday as investors remained optimistic that China shares will get more policy support following the central bank's surprise cut in lending rates.
However, Hong Kong shares were down at midday. Analysts said investors there were more cautious and consolidated positions after Monday's gains.
Beijing is considering further cuts to interest rates and other policy adjustments, insiders told Reuters, on concerns about deflationary risks and high debt loads.
Further easing would likely ease liquidity conditions, which would be highly positive for stocks in China. "Now investors are bullish and the market is definitely a bull market," said Zhang Yanbing, analyst at Zheshang Securities in Shanghai.
The CSI300 index rose to 2,667.13 points at the end of the morning, its highest level in over 20 months, while the Shanghai Composite Index gained 17.9 points, or 0.71 per cent, to 2,550.78 points, its highest level since end-August 2011.
Hong Kong's Hang Seng index dropped 30.2 points, or 0.13 per cent, to 23,862.91 points. The Hong Kong China Enterprises Index lost 57.8 points, or 0.53 per cent, to 10,785.02 points.
In Hong Kong, "there is no movement at all. People are cautious," said Alex Wong, director at Ample Finance Group in Hong Kong. "They are not willing to chase, and not selling aggressively as well." Wong added the overall tone in the market is positive and investors were expecting for additional rate cuts.
Energy shares including PetroChina and Sinopec led losses as prices of U.S. crude and Brent fell ahead of an OPEC meeting this week.
By midday, overseas investors had taken up over 10 per cent of the daily 13 billion yuan northbound quota for the Shanghai-Hong Kong mutual market access programme. Mainland investors took up less than 1 per cent of the daily southbound quota of 10.5 billion yuan.
The total volume of A shares traded in Shanghai was 16.63 billion, while Shenzhen volume was 10.29 billion shares.
In Hong Kong, the total traded was 33.97 billion shares.
