China’s stocks rose the most in a month after the head of the securities regulator said the nation can increase by 10 times the size of two investment programs that allow foreign investors to buy securities.
China can raise quotas to allow foreigners as well as offshore yuan holders in Hong Kong to buy stocks and bonds in the mainland, said Guo Shuqing, Chairman of the China Securities Regulatory Commission. Citic Securities Co. led a rally for brokerages on the prospect that increased demand for equities would boost profit. Hebei Sailhero Environmental Protection High-tech Co. jumped 10 percent and Tasly Pharmaceutical Group Co. surged to a record high as worsening pollution in Beijing may spur demand for health care and environmental protection.
The Shanghai Composite Index rose 3.1 percent to 2,311.74 at the close, the biggest advance since Dec. 14. The CSI 300 Index jumped 3.8 percent to 2,577.73, as gauges of financial, technology and health-care companies jumped more than 4 percent. The Hang Seng China Enterprises Index added 1.3 percent.
“Guo’s comments are very significant as it shows the government is trying to get bullish on stocks and it’s a policy signal as well,” Hao Hong, Hong Kong-based managing director of research at Bank of Communications Co., said in a phone interview. China is trying to improve the quality of its economic growth and investing in environmental technology and health care fit into this plan, he said.
The Shanghai measure has risen 18 percent from an almost four-year low on Dec. 3, while the CSI 300 climbed 22 percent on signs economic growth is picking up. Government reports last week showed exports expanding more than economists forecast, while inflation accelerated.
A gauge of brokerages, banks and developers in the CSI 300 jumped 4.8 percent, the most among 10 industry groups and the steepest gain since Dec. 14. Citic Securities, the biggest brokerage, climbed 6.9 percent to 13.59 yuan. Haitong Securities Co., the second largest, added 7 percent to 10.26 yuan.
China can raise the level of quotas for the Renminbi Qualified Foreign Institutional Investors and the Qualified Foreign Institutional Investors programs, Guo said at a conference in Hong Kong today.
RQFII allows offshore yuan in Hong Kong to be invested in mainland’s securities while QFII permits foreigners to buy yuan-denominated stocks and bonds. Regulators have since 2003 approved a combined QFII quota of $36.04 billion as of Nov. 30, the State Administration of Foreign Exchange said on Dec. 11.
The government scrapped a ceiling on investments by overseas sovereign wealth funds and central banks in its capital markets last month, part of government efforts to encourage long-term foreign ownership and shore up slumping equities.
China has also started preparations for a trial program that would allow individuals to invest in overseas capital markets as the nation seeks a greater role for its currency in global finance.
The People’s Bank of China will proactively prepare for the trial of its qualified domestic individual investor program, it said in a statement on its website on Jan. 11, without giving further details. The central bank lists the so-called QDII2 initiative as one of its major goals for 2013.
Hebei Sailhero surged by the 10 percent daily cap to 15.25 yuan. Beijing SJ Environmental Protection and New Material Co. rose 4.2 percent to 12.38 yuan. Nanjing CEC Environmental Protection Co. rallied 5.1 percent to 13.62 yuan.
“Thematic plays such as environmental-protection stocks are good investments,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million.
Beijing ordered government vehicles off the roads as part of an emergency response to ease air pollution that has smothered China’s capital for the past three days, while warning the smog will persist until Jan. 16.
Official measurements of PM2.5, fine airborne particulates that pose the largest health risks, rose as high as 993 micrograms per cubic meter in Beijing on Jan. 12, compared with World Health Organization guidelines of no more than 25. It was as high as 500 at 6 a.m. today. Long-term exposure to fine particulates raises the risk of cardiovascular and respiratory diseases as well as lung cancer, according to the WHO.
Hualan Biological Engineering Inc. led gains for health-care stocks, jumping 10 percent to 24.85 yuan. Tasly Pharmaceutical surged 3.8 percent to 57.21 yuan.
Average trading volumes on the Shanghai Composite were 38 percent higher than the 30-day average. Thirty-day volatility in the gauge was at 21.3, compared with last year’s average of 17.1. The measure trades at 12.8 times reported earnings, compared with the seven-year average of 21.4, according to data compiled by Bloomberg since 2006.
The “uptrend” for Chinese equities remains unchanged, David Li, UBS AG chairman and country head for China, said in an interview in Bloomberg’s Shanghai office. China’s stocks are poised to rise 20 percent this year, bolstered by the government’s efforts to boost domestic spending and accelerate urban development, he said.
Government data last week showed overseas shipments rose 14.1 percent from a year earlier last month, the most since May and more than double the 5 percent median of 40 economists’ estimates.
December economic data including industrial production and fixed-asset investment as well as a report on fourth-quarter gross domestic product are due on Jan. 18. Economic growth may have recovered to 7.8 percent in the fourth quarter from a year earlier, after sliding to a three-year low of 7.4 percent in the previous period, according to the median estimate in a Bloomberg News survey.
The Bloomberg China-US 55 Index fell 1.1 percent in New York on Jan. 11. It lost 0.4 percent last week for the first weekly slump since the end of November. The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., declined 1 percent to $41.09 Jan. 11, extending its weekly loss to 1.3 percent.