China’s stocks rose the most in a week, led by property and power companies, amid signs the real estate market is stabilizing and speculation grew the government will add to monetary stimulus after a manufacturing gauge weakened.
The Shanghai property index climbed to a record high after Soufun Holdings Ltd. data showed home prices climbed in Beijing and Shanghai. Huaneng Power International, the biggest Chinese utility, soared 10 percent as Qinhuangdao coal prices slumped to a nine-year low. The final Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 48.9, missing analysts’ estimates and signaling a contraction.
The Shanghai Composite Index climbed 0.9 percent to 4,480.47 at the close. The gauge advanced 19 percent in April, the third straight monthly gain, on expectations the government will reduce borrowing costs after cutting interest rates and reserve-requirements ratios twice each since November.
“The market is expecting some cut in interest rates or reserve-requirement ratios soon given the poor situation in the economy,” said Wu Kan, a money manager at Dragon Life Insurance Co. in Shanghai, which oversees about $3.3 billion. “The market will meet more resistance as it moves up. It’s growing more likely that the market will have wild fluctuations.”
The CSI 300 Index advanced 0.8 percent. Hong Kong’s Hang Seng China Enterprises Index gained 0.2 percent, while the Hang Seng Index fell less than 0.1 percent. Markets in China and Hong Kong were closed on Friday for a holiday. The Bloomberg China-US Equity Index added 0.5 percent in New York on Friday.
The deterioration in the HSBC PMI data contrasts with the official manufacturing PMI for April that suggested a stabilization. The official manufacturing Purchasing Managers’ Index was at 50.1, compared with the median estimate of 50.
“China’s authorities are becoming more concerned about the economic downturn,” Wang Tao, chief China economist at UBS Group AG in Hong Kong, wrote in a note Monday. “In the next couple of months, we expect the government to speed up infrastructure investment with enhanced support from policy banks and cut the benchmark interest rate.”
The Communist Party leadership has vowed to step up targeted controls to counter downward pressure on the economy, avoiding any mention of full-blown stimulus.
China’s economic growth in the first quarter conformed to expectations, the official Xinhua News Agency reported, citing a Politburo meeting on Thursday at which President Xi Jinping presided. The nation will “fine tune” its policies and maintain continuity and stability, Xinhua said.
A gauge of property developers in Shanghai climbed 3.4 percent for the steepest gain among five industry groups. China State Construction Engineering Corp. rallied 10 percent. Evergrande Real Estate Group Ltd. jumped 7.5 percent in Hong Kong.
Beijing home prices rose 0.4 percent in April from the previous month, while those in Shanghai added 0.3 percent, Soufun, owner of China’s biggest real estate information site, said. New home sales in Shanghai jumped 59 percent last month, according to property consultant Shanghai UWin Real Estate Information Services Co. The property market is stabilizing with improving buying sentiment, Citigroup Inc. analysts led by Oscar Choi wrote in a note. Prices and volumes may see an uptrend, they wrote.
A measure of utilities in the CSI 300 surged 7.2 percent to a seven-year high. Huadian Power International Corp. and GD Power Development Co. both soared by the daily limit of 10 percent.
Chinese power-station coal prices slid for a 10th straight week to the lowest level since October 2006, according to data from the China Coal Transport and Distribution Association.
Twenty-five companies are scheduled to sell initial public offering shares from tomorrow through May 11, which may freeze 2.34 trillion yuan ($376 billion) based on the median estimate of eight brokerages surveyed by Bloomberg. Margin traders increased holdings of shares purchased with borrowed money on Thursday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising to a record 1.22 trillion yuan.
The Shanghai Composite is valued at 17.4 times 12-month projected earnings, compared with the five-year average multiple of 10.2, according to data compiled by Bloomberg.
An unprecedented amount of money is flowing into the largest exchange-traded funds that track Chinese companies listed in Hong Kong as investors bet on the biggest rally in more than three years will continue.
The Hang Seng H-Share Index Fund lured HK$20.5 billion in April, the largest monthly inflow since at least 2010 and the third-most among equity ETFs globally, according to data compiled by Bloomberg. About HK$29 billion has been added to the fund during the past four months in the longest stretch since 2013 as assets grew to HK$57.1 billion.
— With assistance by Shidong Zhang