Shanghai Pudong Development Bank Co. (600000) surged 8.7 percent, extending this month’s gain to 36 percent, after Li pledged to push forward yuan convertibility. Citic Securities Co. led an advance for brokerages on optimism increased trading volumes will boost profit. Aluminum Corp. of China Ltd. and Jiangxi Copper (600362) Co. paced declines for metal producers.
The Shanghai Composite Index (SHCOMP) rose 0.6 percent to 2,255.60 at the 3 p.m. close, the highest level since June 5. The Shanghai index has rebounded 16 percent since reaching this year’s low on June 27 as August data ranging from exports to industrial output showed growth is accelerating and as shippers and port operators rallied after the State Council approved Shanghai’s free-trade zone.
“There’s a stocks rotation from ports to banks based on expectations they will benefit from the free-trade zone,” said Zhang Gang, strategist at Central China Securities in Shanghai. “Li’s speech about financial reforms are bolstering the industry. As banks take up a huge weighting in the index, the gains get amplified.”
A gauge of financial companies in the CSI 300 Index, which accounts for 41 percent of the index’s total weighting, rose 2.7 percent, the most among 10 industry groups. The CSI 300 climbed 1 percent to 2,507.46. The Hang Seng China Enterprises Index (HSCEI) added 0.1 percent. The Bloomberg China-US Equity Index lost 0.4 percent in New York yesterday.
The Shanghai measure is valued at 9.1 times its projected 12-month earnings, the highest since June 11, according to data compiled by Bloomberg. Trading volumes for the index were 62 percent above the 30-day average today.
The CSI 300 financial gauge has gained 6.3 percent this week, the most since February. Shanghai Pudong Bank surged 0.98 yuan to 12.25 yuan, the highest close since April 2010. Ping An Bank Co. (000001) gained 6.2 percent to 13.47 yuan. China Citic Bank Corp., the banking unit of the largest investment company, added 2.5 percent to 4.16 yuan.
China will push forward interest-rate and exchange-rate reforms and the internationalization of the yuan while promoting the currency’s convertibility under the capital account, Premier Li said in a speech yesterday at the World Economic Forum in the northeast city of Dalian.
The reforms are expected to take place in the proposed Shanghai free-trade zone, which was approved by the State Council headed by Li. The trade zone is part of the central government’s plan to develop the city into a global financial and shipping center by 2020.
Citic Securities, China’s biggest listed brokerage, climbed 3 percent to 13.56 yuan. Haitong Securities Co. (600837), the second largest, gained 4.2 percent to 13.27 yuan.
Investors should be selective in buying shares of companies that will benefit from the Shanghai free-trade zone given recent equity rallies and the prospect earnings won’t get a boost until the medium term, according to Goldman Sachs Group Inc.
Shanghai Zhenhua Heavy Industries Co. slumped 3.7 percent to 4.16 yuan after saying it had no inside information to disclose following a 32 percent rally in the past four days. Shanghai International Port (Group) Co. (600018) slid 3.1 percent to 6.68 yuan. The stock had jumped 170 percent since Aug. 22 through yesterday.
The Shanghai index’s 14-day relative strength index, measuring how rapidly prices have advanced or dropped during a specified time period, was at 80.9 today. Readings above 70 indicate a price may be poised to fall.
Aluminum Corp., or Chalco as the biggest aluminum producer is known, dropped 1.5 percent to 3.92 yuan. Its RSI jumped above 70 on Sept. 10. Jiangxi Copper, the largest copper producer, declined for the first time in five days, losing 1.9 percent to 17.48 yuan.
“The market needs consolidation here for profit taking after the recent nice run,” said Li Jun, a strategist at Central China Securities Co. in Shanghai.