Chinese stocks rose, sending the Shanghai Composite Index to its biggest advance in seven weeks, on speculation the government will take steps to bolster equities. Financial and commodity companies led gains.
Citic Securities Co. and Haitong Securities Co., the largest-listed Chinese brokerages, climbed at least 3 percent in Hong Kong and Shanghai after the State Council said it will deepen reforms of the nation’s capital markets including relaxing limits on foreign investment in listed companies. Yanzhou Coal Mining Co. surged 10 percent and Jiangxi Copper Co. jumped 6.8 percent. The rally for energy and metal shares pared losses for the worst-performing industry groups in the past year. Tencent Holdings Ltd. climbed 5.3 percent in Hong Kong.
The Shanghai Composite rose 2.1 percent to 2,052.87 at the close, the biggest gain since March 21. While Chinese President Xi Jinping said the nation needs to adapt to a “new normal” in the pace of economic growth, expectations are building among equity investors that the government will roll out market-boosting measures, according to Dragon Life Insurance Co. The benchmark index has rallied from levels near 2,000 at least twice this year as policy makers took steps to reduce money-market rates and speed-up infrastructure spending.
“The announcement is good for the market in the medium and long term and raises the government’s attention to the stock market to the state level,” said Wu Kan, a fund manager at Shanghai-based Dragon Life, which oversees about $3.3 billion. “This will boost the confidence of the market.”
The Hang Seng China Enterprises Index added 1.5 percent at the close, while the Hang Seng Index gained 1.8 percent. The CSI 300 Index jumped 2.2 percent to 2,180.05. Trading volumes in the Shanghai Composite were 20 percent above the 30-day average, according to data compiled by Bloomberg.
The government will expand the quotas for capital flow and develop commodities trading tools, China’s cabinet said in a statement after the market close on May 9, without providing details. Some of the measures had been announced earlier by regulators.
“Our country’s capital markets have developed very rapidly over the last 20 years, and we have nascent market systems to cover stocks, bonds and futures,” the State Council said in the statement. “Our nation’s capital markets are still immature and some organizational and systematic problems still exist.”
The Shanghai index slid 0.8 percent last week for a fourth weekly loss on concern the growth slowdown will curb earnings and the potential resumption of initial public offerings will divert funds. The measure has dropped 3 percent this year, taking valuations to 7.6 times 12-month projected earnings, compared with the five-year average multiple of 11.9.
“The market is concerned that the current leadership are not really focused on the economy or the financial markets,” said Erwin Sanft, head of China and Hong Kong equity research at Standard Chartered Plc. “The fact that the State Council came out with the statement talking about further opening up of the capital markets shows that there is some attention being paid to capital markets.”
HSBC Holdings Plc called the document a blueprint for financial-market reforms for the next five years, highlighted by changes to the IPO system to reduce government involvement in the timing, frequency and pricing of equity issuance.
President Xi is pushing changes that may be the most sweeping since Deng Xiaoping’s liberalization to loosen government controls in everything from energy pricing to banking. China last month announced a plan to connect the stock exchanges of Hong Kong and Shanghai to promote trading volumes and the use of the yuan.
China’s growth fundamentals haven’t changed and the country is still in a “significant period of strategic opportunity,” Xi said, according to a Xinhua News Agency report on the central government website on May 10.
Citic Securities rose 3.9 percent in Shanghai. It gained 4.9 percent in Hong Kong, halting a six-day slide. Haitong Securities added 3 percent in Shanghai and 3.4 percent in Hong Kong.
Measures of energy and material stocks in the CSI 300 jumped more than 4 percent today, the biggest gains among 10 industry groups. The material gauge has slumped 24 percent over the past year, while the energy measure plunged 31 percent.
Yanzhou Coal jumped 10 percent in Shanghai and 4.5 percent in Hong Kong. Jiangxi Copper rallied 6.8 percent in Shanghai. Jilin Ji En Nickel Industry Co. surged by the daily limit for a third day in Shanghai as nickel prices rose to a two-year high in London on concern about strained supplies.
Material and energy stocks advanced today on speculation they have been oversold and that they will join the recent rally for nickel producers, Wang Zheng, chief investment officer at Jingxi Investment Management Co., said by phone.
Hong Kong Stocks
In Hong Kong, Tencent rose 5.3 percent. First-quarter mobile gaming revenue may be 1.5 billion yuan ($240 million) versus 600 million yuan a quarter earlier on a growing Wechat user base and higher penetration of mobile-payment services, Goldman Sachs Group Inc. wrote in a note dated May 9.
Cheung Kong Holdings Ltd., the builder controlled by Asia’s richest man, gained 4.1 percent, leading developers higher. The Hong Kong government is considering extending a deadline for a double stamp duty refund by one to two months for citizens who are moving homes, the Oriental Daily News reported today, citing an unidentified person.
The statistics bureau will release April data on industrial production, retail sales and fixed-asset investment tomorrow. Factory production probably expanded 8.9 percent, according to Bloomberg estimates, compared with 8.8 percent growth in the previous month. Official data released last week showed inflation eased while exports rebounded.
New local-currency lending was 774.7 billion yuan in April, the central bank said on its website today after the market close. That compared with the median analyst estimate of 800 billion yuan. Aggregate financing, which includes bank lending, off balance-sheet loans and bond and stock sales, was 1.55 trillion yuan last month, compared with the median estimate of 1.48 trillion yuan. M2 money supply rose 13.2 percent versus the estimate for a 12.2 percent gain.
Conditions are basically mature for IPOs to restart as preparatory work has largely been done, according to China International Capital Corp. The IPO resumption should have negative impact on A-share liquidity, which has already been priced in, CICC analysts Hanfeng Wang and Qiusuo Li wrote in a report dated today.
About 557 companies are waiting for IPO approval as of May 9, of which 34 have obtained the green light, CICC said. The total size of all pending IPOs is at more than 380 billion yuan, it said.