China’s stocks rose on their first day of trading after a weeklong holiday as rallies for technology and small-company shares overshadowed manufacturing and services data signaling an economic slowdown.
Goertek Inc., an Apple Inc. supplier, jumped the most in six weeks to pace gains for technology shares. Anhui Conch Cement Co. led a rally for producers of the building material after Morgan Stanley upgraded the company’s Hong Kong-listed shares on improved prospects for the cement market. Ping An Insurance (Group) Co. slumped 2.4 percent, tracking declines in the Hong Kong-traded shares during the Lunar new year holiday.
The Shanghai Composite Index (SHCOMP) advanced 0.6 percent to 2,044.50 at the close, erasing a loss of as much as 0.9 percent. The ChiNext index of small-company stocks rallied 2.5 percent to 1,532.69, a record high. Chinese stocks were buoyed by a rebound in global equities over the past two days and a perception that last month’s slump was excessive, said Zhang Gang, a strategist at Central China Securities in Shanghai.
“Losses for A shares are going to be limited,” said Zhang. “Bets should be placed on small-cap stocks.”
The CSI 300 Index added 0.5 percent to 2,212.48 The Hang Seng China Enterprises Index rose 1.3 percent, paring losses since Jan. 30 to 1.6 percent.
Trading volumes in the Shanghai gauge were 1.7 percent below the 30-day average, according to data compiled by Bloomberg. The measure lost 3.9 percent in January, capping the biggest January drop in four years, amid concern slowing economic growth will hurt earnings. It’s valued at 10.2 times reported earnings, down from 29 times in 2009.
“We still think China will do better this year,” said Catherine Yeung, Hong Kong-based investment director for equities at Fidelity Investment Management Ltd., who favors industries such as steel and cement. “Given where valuations are, we are still finding a number of opportunities.”
The MSCI Emerging Markets Index rose 0.8 percent today, adding to yesterday’s 1.4 percent gain. The index had tumbled 8.5 percent this year through Feb. 4, the worst retreat for that period since at least 1988, according to data compiled by Bloomberg. The Hang Seng gauge of Hong Kong companies sank 11 percent from its Dec. 2 high. The Hang Seng China Enterprises Index (HSCEI) lost 18 percent during that time.
“The A-share market is more policy-driven than growth-driven,” Erwin Sanft, the head of China and Hong Kong equity research at Standard Chartered Plc, said by e-mail on Feb. 4. “While some weakness is to be expected, it is unlikely to be as much as we see in the U.S. or Hong Kong.”
China’s official Purchasing Managers’ Index fell to a six-month low of 50.5 in January as output and orders slowed, Feb. 1 data showed. The non-manufacturing PMI dropped to 53.4, the lowest since at least March 2011, according to a Feb. 4 report. HSBC Holdings Plc and Markit Economics’ services Purchasing Managers’ Index slid to 50.7 percent, the lowest since August 2011, a report today showed. Numbers above 50 signal expansion.
The manufacturing data “reinforces the trend of softening growth momentum since the fourth quarter of last year,” wrote Zhu Haibin, chief China economist at JPMorgan Chase & Co. “The volatility in the financial market adds to the concern about economic slowing.”
Goertek paced gains for technology shares, rising 5.6 percent to 30.50 yuan. Sanan Optoelectronics Co. jumped 9.8 percent to 26.21 yuan. A gauge of technology stocks in the CSI 300 advanced 3 percent, the most among the 10 industry groups.
Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu, said small-company and technology shares were boosted by speculation there won’t be initial public offerings until next month after a recent flurry of IPOs diverted funds.
“The first batch of IPOs has been released and the next batch will come around mid-March at the earliest,” said Mao. “This is boosting small-cap stocks.”
The China Securities Regulatory Commission may have some new restrictions on IPOs, China National Radio reported yesterday, citing Liu Shengjun, deputy director of CEIBS Lujiazui Institute of International Finance.
Anhui Conch rose 4.4 percent in Shanghai and advanced 2.7 percent in Hong Kong. The stock was upgraded to overweight at Morgan Stanley, which also named it a top cement pick in a Feb. 5 report.
Ping An Insurance, the second-biggest Chinese insurer, lost 2.4 percent to 38.21 yuan. The Hong Kong-traded shares slid 3.8 percent during the holiday break through yesterday. Citic Securities Co., the nation’s biggest-listed brokerage, fell 0.9 percent to 11.48 yuan. Its Hong Kong shares slumped 3.4 percent during the holiday.
A gauge of drugmakers fell the most in the CSI 300 today. Yunnan Baiyao Group Co. lost 3.1 percent to 88.95 yuan. Tasly Pharmaceutical Group Co. retreated 2.5 percent to 43.72 yuan.
The Bloomberg China-US Equity Index slumped 2 percent from Jan. 30 through yesterday, while the Hang Seng Index dropped 2.8 percent. The overseas retreat left shares in China’s $3.4 trillion market valued at a 1.1 percent premium versus their Hong Kong-listed counterparts, after touching the widest gap in four months on Feb. 5, according to the Hang Seng China AH Premium Index.
“H shares are more vulnerable,” Grace Tam, a Hong Kong-based global market strategist at JPMorgan Asset, which oversees about $1.5 trillion, said by phone on Feb. 4. “Foreign investors can buy and sell in the H-shares market. For A shares, it’s mostly domestic investors, so it will be less affected by what’s happening externally. What’s driving A shares is the domestic market.”
Short-term losses may create buying opportunities for China Securities Co.’s Zhang Limin. He said he placed red dollar notes under his quilt during the New Year holidays for good luck as part of his hometown tradition.
“I put a lot, a lot of red notes under the blanket,” Zhang, an investment adviser, said by phone from the northeastern city of Harbin. “I turn ecstatic when I see market volatility. As long as there are big movements, there are opportunities.”
To contact the reporter on this story: Weiyi Lim in Singapore at firstname.lastname@example.org