China’s stocks rose to the highest level since October, led by steel, material and drug companies, as a drop in money-market rates eased concern of a cash squeeze before the resumption of initial public offerings next month.
Anhui Conch Cement Co. climbed 3.4 percent after prices for the building material increased. Baoshan Iron & Steel Co. (600019) led gains for steelmakers after the China Securities Journal reported the government is taking new measures to curb industry overcapacity. Yunnan Baiyao Group Co. paced an advance for drugmakers, rising 5.2 percent, as Hong Kong reported its first case of a form of bird flu. Industrial & Commercial Bank of China Ltd.. (601398) the biggest lender, slid 1.3 percent.
The Shanghai Composite Index (SHCOMP) gained 0.7 percent to 2,222.67 at the close. The ChiNext index rose 0.1 percent after plunging 8.3 percent yesterday, the steepest drop on record. Some investors are switching to large-company shares from smallcaps before the restart of new share offerings, said Zeng Xianzhao, an analyst at Everbright Securities Co.
“There’s some sector rotation as panic among investors has eased,” Zeng said by phone from Chongqing. “Financials are hurt by investors taking profits after yesterday’s gain.”
The CSI 300 Index advanced 1 percent to 2,442.78. The Hang Seng China Enterprises Index (HSCEI) slid 0.7 percent to 11,462.81. Trading volumes in the Shanghai index were 2.1 percent above the 30-day average, while 100-day volatility fell to the lowest level in a year, according to data compiled by Bloomberg.
The ChiNext, which has gained 76 percent this year, trades at 30.7 times projected earnings for the next 12 months, while the Shanghai Composite is valued at 8.7 times and the Hang Seng China Enterprises Index has a multiple of 7.8, according to data compiled by Bloomberg. The Shanghai index has fallen 2.1 percent in 2013 amid concern slowing economic growth will curb earnings.
China may set its 2014 growth target at 7 percent, reported the Economic Information Daily, which is managed by the official Xinhua News Agency,
“The news suggests that a 7 percent target has become a more likely choice in the policy circle,” Zhang Zhiwei, Nomura Holdings Inc.’s China economist, wrote in a report. “A decision will be made at the Central Economic Working Conference to be held later this month, although the exact date is not yet known.”
Baoshan Steel, the biggest-listed steelmaker, rose 1.9 percent to 4.29 yuan, paring this year’s loss to 12.3 percent. Angang Steel Co. surged 2.8 percent to 3.33 yuan.
China’s Ministry of Industry and Information Technology is studying setting up steel production capacity quota trading to help curb overcapacity, the China Securities Journal reported today. Premier Li Keqiang has pledged to curb excess capacity in industries including steel, which Chinese authorities have cited for eroding company profits and contributing to pollution.
Anhui Conch Cement, the nation’s biggest producer of the building material, rose 3.4 percent to 18.47 yuan. Huaxin Cement Co. added 5.5 percent to 12.89 yuan. Cement prices rose in Chinese cities and provinces including Shanghai, Henan, Jiangsu and Zhejiang, HSBC Holdings Plc analysts led by Wei Sim wrote in note dated yesterday.
China’s securities regulator said on Nov. 30 that 50 companies will be ready for new share sales by the end of January. China, the world’s largest IPO market in 2010, with a record $71 billion raised, hasn’t had an initial public offering since October 2012 as the regulator cracked down on fraud and misconduct among advisers and companies.
The government asked companies that previously got approval from securities regulator on their IPOs to submit new plans based on the new rules, the China Securities Journal reported today, without saying where it got the information.
“Small-cap stocks have risen too much this year so there’s plenty of room to fall,” said Mao Sheng, an analyst at Huaxi Securities Co. in Chengdu. “While money market rates eased today, we can expect liquidity to tighten at the end of the year, impacting blue-chips.”
Money-market rates fell for a third day as the central bank added funds to the financial system via seven-day reverse-repurchase agreements. The seven-day repurchase rate, a gauge of funding availability in the system, retreated to 4.62 percent as of 3:51 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.
A gauge of drugmakers in the CSI 300 rose 2.3 percent, the second-most among 10 industry groups. Yunnan Baiyao, a Chinese herbal medicine company, rose 5.2 percent to 105.86 yuan. Jiangsu Hengrui Medicine Co. surged 3.7 percent to 34.16 yuan.
A 36-year-old Indonesian domestic helper is in critical condition after being infected with the new H7N9 flu strain, Hong Kong’s government said yesterday. She had traveled to the neighboring city of Shenzhen, where she bought and slaughtered a chicken, according to a statement.
A measure of financial companies in the CSI 300 slipped 0.2 percent, the only industry group to decline. ICBC, which rallied 1.8 percent yesterday, slipped 1.3 percent to 3.82 yuan. Citic Securities Co., the biggest brokerage, lost 1.2 percent to 3.40 yuan after jumping 5.1 percent yesterday on speculation brokerages will benefit most from the IPO resumption.
To contact the reporter on this story: Weiyi Lim in Singapore at email@example.com