Most Chinese stocks rose as Shanghai-based companies rallied on speculation the local government is speeding up state-owned enterprise reform to boost profitability. Benchmark indexes were little changed as investors waited for the outcome of a policy conference.
Shanghai Lansheng Corp. surged 10 percent after the government approved its restructuring plan and Goldman Sachs Group Inc. said SOE reform may reverse the Chinese stock market’s underperformance. Sanan Optoelectronics Co. led technology companies to the biggest gain among industry groups. China Life Insurance Co. and Citic Securities Co. dragged down financial companies with losses of at least 0.6 percent.
About 11 stocks rose for every 10 that fell on the Shanghai Composite, which dropped 0.1 percent to 2,202.80 at the close. The Hang Seng China Enterprises Index slid 1 percent. The government may cut its 2014 economic growth target to 7 percent from 7.5 percent at its annual central economic work conference, the Economic Information Daily said Dec. 4. The meeting is expected to end today or tomorrow.
“Investors are on the sidelines waiting for the results of the conference,” said Zhang Haidong, an analyst at Tebon Securities Co. in Shanghai. “SOE reforms are important measures for the government to sustain growth and that makes them a good thematic investment.”
The CSI 300 Index slipped 0.1 percent to 2,410.01. The Bloomberg China-US Equity Index fell 3.9 percent in New York yesterday. Trading volumes in the Shanghai index were 21 percent below the 30-day average today, according to data compiled by Bloomberg. The gauge trades at 8.6 times projected profit for the next 12 months, compared with the seven-year average of 15.2, data showed.
The Shanghai Composite has risen 3.1 percent since the government vowed on Nov. 15 to allow more private investment in state-controlled industries and loosen its one-child policy in the most sweeping reforms in two decades.
China’s reform blueprint, if implemented quickly, will “destroy” the system that has made China successful, according to BNP Paribas SA. Hope for political reforms lies in President Xi Jinping’s second term when five of seven members in the Politburo’s Standing Committee will retire and be replaced, strategist Chi Lo wrote in a report. Until then, it’s “unrealistic” to expect China to implement any “Big Bang” reforms, Chi wrote.
The Shanghai index may trade between 1,900 and 2,500 next year, analysts led by Mao Changqing at Citic Securities Co. wrote in a report today. Stocks have limited room for gains and losses in 2014 as economic and corporate earnings growth is still slowing in the short term and “pains” from reforms may emerge, the report said.
Shanghai Lansheng, which operates a foreign trade business, surged by the daily limit to 18.70 yuan after being suspended yesterday. The company said it won approval from the city government to restructure with state-owned Shanghai Eastbest International (Group) Co.
Local governments are speeding up SOE reform plans that will give the market a decisive role in resource allocation, the Shanghai Securities News reported on Dec. 10. Shanghai may release its plan next week, it said.
A gauge of technology companies in the CSI 300 rose 1.5 percent, the biggest advance among 10 industry groups. Sanan Optoelectronics advanced 5.9 percent to 24.30 yuan. Beijing Enlight Media Co. led gains for small companies, jumping 10 percent to 41.55 yuan. The ChiNext index added 2.8 percent.
Han’s Laser Technology Co., a supplier to Apple Inc., fell 1.2 percent to 12.53 yuan in Shenzhen after buying Israel’s Nextec Technologies to expand in the market for laser measurement devices used in auto and aircraft industries.
A measure tracking financial stocks in the CSI 300 slid 0.5 percent, the second most among the 10 industry groups. China Life, the nation’s biggest insurer, fell 1.5 percent to 15.42 yuan. Citic Securities lost 0.6 percent to 12.61 yuan.
Local-currency loans were 624.6 billion yuan ($103 billion) last month, the People’s Bank of China said after the market closed yesterday, compared with the 580 billion yuan median estimate of 41 analysts surveyed by Bloomberg News. Aggregate financing was 1.23 trillion yuan, topping all economists’ estimates, while M2 money supply increased 14.2 percent from a year earlier.