China Stocks in Hong Kong Pare Biggest Weekly Gain Since April

Chinese stocks in Hong Kong pared their biggest weekly advance in five months as traders weighed whether the government will intensify measures to revive the flagging economy.

The Hang Seng China Enterprises Index fell 0.6 percent to 9,718.28 at the close paring its weekly advance to 6 percent. China Shenhua Energy Co. and PetroChina Co. led declines by energy producers on Friday, while Air China Ltd. climbed 3.2 percent as oil prices slid. The Shanghai Composite Index rose 0.1 percent in thin trading to cap a 1.3 percent weekly gain.

Deutsche Bank AG sees the gauge of so-called H shares rallying 33 percent by the end of the year as the government deploys more fiscal stimulus, according to a report by the brokerage. China’s broadest measure of new credit increased in August, suggesting monetary easing is showing signs of driving demand for loans. The wildest price swings in Shanghai shares in 18 years is luring foreign investors to Hong Kong stocks, Jun Yang Securities Co. says.

“After the volatility in the A shares the last several months,
investors worry about the policy-driven market so they go for H
shares now if they want to buy Chinese stocks,” said Kenny Tang, chief executive officer of Jun Yang Securities Co. “They’re more stable and will not be intervened in by the government.”

The Hang Seng Index dropped 0.3 percent in Hong Kong, trimming its weekly advance to 3.2 percent. The CSI 300 Index lost 0.3 percent. Turnover on the Shanghai exchange fell to a seven-month low.

Shenhua Energy slumped 5.1 percent, its biggest decline since Aug. 24. PetroChina slid 3.9 percent. Crude futures fell 2.1 percent in New York. Air China capped an 11 percent advance for the week, its biggest since April.

Yuan Intervention

The offshore yuan pared gains in Hong Kong after the currency strengthened 1.2 percent versus the dollar on Thursday amid signs of state intervention. The central bank support of the yuan abroad was the latest in a series of extraordinary efforts to slow the flow of capital out of the country and safeguard the currency following the largest devaluation in more than two decades in August. By aligning the offshore yuan rate with the onshore rate, China is attempting to stem speculation of further declines, traders said.

Aggregate financing rose to 1.08 trillion yuan ($169.5 billion) in August, from 718.8 billion yuan in July, according to data by the People’s Bank of China released after markets closed, matching the estimate for 1 trillion yuan in a survey of economists. New yuan loans fell to 809.6 billion yuan after surging to a six-year high in July on government stock rescue efforts. M2 money supply rose 13.3 percent from a year earlier.

China’s plan to introduce a stock-market circuit breaker would help calm volatility, according to analysts in a Bloomberg survey. Twelve of the 15 respondents were in favor of the proposal while remainder were against. Under the current plan, a move of 5 percent by the CSI 300 Index would trigger a 30-minute halt for stocks, options and index futures, according to a joint statement on Monday by the nation’s two bourses and the futures exchange.

Traders decreased holdings of shares purchased with borrowed money on Thursday, with the outstanding balance of margin debt on the Shanghai Stock Exchange falling 0.4 percent to 619.9 billion yuan ($97 billion).

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