Chinese stocks trading in Hong Kong rallied to the highest level since June 2011 after a three-day holiday as the city’s equities tracked gains in mainland equities. The Shanghai Composite Index approached the 4,000 level.
Haitong Securities Co., China Communications Construction Co. and China Oilfield Services Ltd. surged at least 15 percent in Hong Kong. Gome Electrical Appliances Holding Ltd. jumped 23 percent after Citigroup Inc. recommended the shares. Industrial and financial companies climbed in Shanghai with trainmakers China CNR Corp. and CSR Corp. jumping 10 percent for a second day. They both surged 37 percent in Hong Kong. China Life Insurance Co. gained 5.8 percent in Shanghai.
The Hang Seng China Enterprises Index rallied 4.7 percent to 13,250.36 at 1:17 p.m., while the Hang Seng Index advanced 3 percent to the highest level since May 2008. The Shanghai Composite rose 0.4 percent to 3,979.11, after changing directions at least six times in its bid to reach the 4,000 level for the first time since 2008.
“Breaching the 4,000 level can be read by retail investors as a bullish signal,” said Gerry Alfonso, a director at the international business department of Shenwan Hongyuan Group Co. in Shanghai.
The Shanghai gauge has jumped 89 percent over the past year, the best-performing major global indexes tracked by Bloomberg, amid speculation the People’s Bank of China will further ease monetary policy after cutting interest rates twice since November and lowering reserve-requirement ratios of lenders once. The H-shares gauge has risen 28 percent.
The Shanghai Composite is valued at 15.1 times 12-month projected earnings, compared with the five-year average multiple of 10.2, according to data compiled by Bloomberg. Its relative-strength index, measuring how rapidly prices have advanced or dropped during a specified time period, was above 70 for a 16th day on Wednesday, signaling shares may be poised to fall.
The CSI 300 Index advanced 0.5 percent, while the ChiNext index, dominated by technology companies, slid 2.5 percent. Bloomberg China-US Equity Index added 0.7 percent Tuesday.
Industrial and financial shares led gains in both Hong Kong and Shanghai. Citic Securities Co. surged 10 percent in Hong Kong and climbed 4.2 percent in Shanghai. China Railway Group Ltd. jumped 9.7 percent in Hong Kong. Shenwan Hongyuan Group Co. added 6 percent in Shanghai.
Gome rallied the most since June 2009 after Citigroup recommended the stock over its mainland rival Suning Commerce Group Co. because of cheaper valuations and a higher net cash to market cap ratio.
Chinese buying of Hong Kong equities through the Shanghai trading link is on course for the highest daily total since the program began in November. Net buy orders for Hong Kong shares through the link reached 6.7 billion yuan ($1.1 billion) on Wednesday, surpassing the daily record within the first half hour of trading.
A world-beating surge in Chinese technology stocks is making the heady days of the dot-com bubble look almost tame by comparison.
The industry is leading gains in China’s $6.9 trillion stock market, sending valuations to an average 220 times reported profits, the most expensive level among global peers. When the Nasdaq Composite Index peaked in March 2000, technology companies in the U.S. had a mean price-to-earnings ratio of 156.
“Chinese technology stocks do resemble the dot-com bubble,” Vincent Chan, the Hong Kong-based head of China research at Credit Suisse Group AG, Switzerland’s second-biggest bank, said in an interview on April 2. “Given stocks fell 50 to 70 percent when that bubble burst in 2000, these small-cap Chinese shares may face big corrections when this one deflates.”
China will start to release March economic data on April 10, starting with inflation. Consumer prices probably rose 1.3 percent, slowing from a 1.4 percent gain in February, while producer prices may have declined 4.8 percent, unchanged from the previous month, according to the median estimate of a Bloomberg survey.
— With assistance by Shidong Zhang