China’s stocks jumped the most since October 2009 on speculation state-backed institutions were buying shares as a manufacturing survey added to optimism the world’s second-largest economy will rebound.
The Shanghai Composite Index climbed 4.3 percent to 2,150.63 at the close, with trading volumes more the double the 30-day average. A gauge tracking financial companies surged 6.7 percent as brokerages jumped on signs the government will allow more funds to buy equities. Sany Heavy Industry Co. led a rally by industrial companies after a preliminary reading for a factory output index rose.
“It looks like institutional investors are re-entering the market and they have to increase their stock positions now in order not to miss the boat,” said Dai Ming, a fund manager at Hengsheng Hongding Asset Management Co. in Shanghai, which manages $190 million. “The economy has stabilized.”
The CSI 300 Index surged 5.1 percent to 2,355.86, with all 10 industry groups adding more than 2.4 percent. The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong rose 1.4 percent to a nine-month high. The IShares FTSE A50 China Index ETF, which mimics the performance of the 50 biggest A share companies, jumped 4.5 percent in Hong Kong.
The Shanghai Composite advanced 4.3 percent this week, the biggest gain in 13 months and extending last week’s 4.1 percent rally. Shares have rebounded 9.7 percent from an almost four-year low reached on Dec. 3. The gauge is still down 2.2 percent this year, heading for a third straight annual loss.
The 994-member index trades at 11.9 times reported earnings after valuations fell to 10.8 this month, the lowest level since at least 1997, data compiled by Bloomberg show.
“There’s speculation that Ping An Insurance is increasing its positions in Chinese equities,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. Ping An Insurance (Group) Co., the second-largest insurer in China, rallied 8 percent to 41.96 yuan.
Speculation that large institutions are buying shares follows data this week showing the number of trading stock-trading accounts containing funds declined to the lowest in two years.
A gauge tracking financial companies jumped 6.7 percent on the CSI 300. Citic Securities, China’s biggest listed brokerage, rallied 7.4 percent to 11.53 yuan. Haitong Securities Co., the second largest, gained 5.6 percent to 9.28 yuan.
China may relax or abolish a rule that requires Renminbi Qualified Foreign Institutional Investors to keep most of their funds in bonds, according to the Hong Kong Monetary Authority, a move that may boost demand for stocks.
RQFII funds, which raise yuan overseas, now must invest at least 80 percent of their assets in China’s onshore bond market, with the rest going into equities or kept as cash.
Stocks also gained ahead of this weekend’s Central Economic Working Conference, which sets the tone for policies for 2013. The Chinese government may announce it will keep its economic growth target at 7.5 percent, according to Nomura Holdings Inc.
Industrial & Commercial Bank of China Ltd. paced gains for banks, jumping 3.8 percent to 4.10 yuan. Agricultural Bank of China Ltd. advanced 4.1 percent to 2.79 yuan, the most since October 2010.
The December preliminary reading for the HSBC Holdings Plc and Markit Economics’s purchasing managers index rose to 50.9, more than the 50.8 median estimate in a Bloomberg News survey of economists and the final reading of 50.5 for November. Last month was the first time in 13 months it was above the expansion-contraction dividing line of 50.
Sany Heavy, the biggest Chinese machinery maker, advanced 6.7 percent to 9.25 yuan. Anhui Conch Cement Co. rose 4.7 percent to 18.76 yuan, its highest level since November 2011.
Today’s report may bolster confidence in the economic recovery after November’s trade and new loans trailed estimates.
Recent stock-market gains had failed to stem equity outflows. Accounts containing funds used to trade stocks dropped by about 49,000 in the week to Dec. 7 to 55.55 million, the lowest level since the week to Nov. 26, 2010, according to regulatory data compiled by Bloomberg on Dec. 12. Investors emptied 205,000 accounts the previous week, the most in 16 months.
The Shanghai Composite’s 9.7 percent rally from its Dec. 3 low still lags the 25 percent gain by the Hang Seng China index of mainland companies listed in Hong Kong from its Sept. 5 low. Chinese companies on the mainland traded at their biggest discount to their Hong Kong-traded counterparts since January 2011 yesterday, according to an index from Hang Seng Bank Ltd.