Pan Shiyi (right) is one of the most active and striking personalities in Chinese business. SOHO China, the company he co-founded with his wife Zhang Xin in 1995, has already become Beijing’s largest real estate developer. It along with other listed heavyweights like China Vanke lifted A shares today. Photo: Company

REAL ESTATE counters in China were hot properties today, lifting the Shanghai Composite -- the benchmark index for A shares – by 0.94% to close at 2,688.32.

Meanwhile, the Hang Seng Index in Hong Kong added 1.73% to finish the day at 21,626.17.

The A-share sub-index of property shares was up 2.50% on the day.

Macroeconomic data out of China over the weekend and news from Switzerland cheered investors today.

Data released Saturday revealed a higher-than-expected nearly 14% year-on-year August jump in industrial production, a key indicator of the overall health of China’s heavily industrialized economy.

This was an improvement on July’s 12.9% rise.

And the country was not only producing, but consuming as well.

August retail sales leapt 18.4% year-on-year, improving on July's 17.9% rise.

Meanwhile, last month’s CPI rose 3.5%, an inflation increase in line with expectations which helped to quell fears that the People’s Bank of China, the country’s Central Bank, might hike lending rates to curb price growth.

This was the core driver of property prices today, one of the most vulnerable sectors to any fluctuations in credit policy.

Developers have a significant vested interest in any changes in lending policy. Photo: Soho China

Investors took cheer on more clarity from the highly anticipated global capital regulations being hammered out in Basel, Switzerland.

General sentiment was boosted after the Basel Committee on Banking Supervision moved to substantially increase the ratio banks must now set aside to protect against potential losses, but allowed banks time to adapt to the new rules.

In Hong Kong, China Oilfield Services (HK: 2883: SHA: 601808) was up 1.4% while ICBC (HK: 1398) was flat and China Construction Bank (HK: 939) was up just 0.2%.

Chinese media said the combination of robust production and consumption data from China over the weekend and a tolerable rise in inflation were helping to bring fence-sitters and window shoppers back to the market which helped lift A shares by nearly one percent today.

Select commodities stocks were higher following a 3% hike in crude oil futures in New York Friday, finishing above 76 usd a barrel for the first time in a month.

CNOOC Ltd (HK: 883) rose 2.3% in Hong Kong.

A shares were also buoyed by petroleum firms and vehicle makers, though gains were tempered by bank stocks' underperformance.

Banking Ballast: A shares are expected to rise, tighter banking regulations notwithstanding

Analysts polled by media said the Shanghai Composite should trend upward for the short term on the rosy economic indicators released over the weekend, however banks should keep a major bull run at bay due to their new loan-reserve regulations.

Banks were also under pressure after local media outlet China Business News cited an unnamed source as saying that the lending watchdog, China Banking Regulatory Commission, plans to mandate that banks put aside the equivalent of 2.5% of their outstanding loans as reserves in 2011 to help bolster their balance sheets.

At present, the CBRC has no such requirement on the books.

See earlier story: CHINA SHARES: Now What? 10 Market Sages Weigh In...

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