- Industrial companies rally on speculation of increased orders
- Flash PMI is expected to signal manufacturing contraction
China’s stocks rose for a second day, led by industrial and technology companies, as President Xi Jinping headed to the U.S. for his first state visit.
The Shanghai Composite Index gained 1.9 percent to 3,156.54 at the close, reversing a drop of 1.2 percent as volatility hovered near the 18-year highs reached last week and trading volumes slumped 36 percent from the 30-day average. China Railway Group Ltd. and XCMG Construction Machinery Co. surged more than 7 percent in Shanghai. During Xi’s visit from Sept. 22-25, China and the U.S. are expected to reach agreements on trade, energy, climate, finance, aviation, defense and infrastructure construction, Foreign Minister Wang Yi said.
Industrial and technology companies rallied on speculation they may see increased orders following Xi’s visit, which concludes with a summit with President Barack Obama on Friday, according to Shenwan Hongyuan Group Co. Deals announced before the trip include the first Chinese-made bullet-train project in the U.S.
“The official visit of Chinese authorities to the U.S. is giving support to some stocks,” said Gerry Alfonso, a sales trader at Shenwan Hongyuan. “Chinese companies are looking into expanding overseas and these official visits could be rather helpful. Technology-related stocks are clearly among a top candidate for such type of collaboration. It should be noted that there hasn’t been any announcement by either side, it is just market expectation.”
The Hang Seng China Enterprises Index dropped from a one-month high, losing 1.6 percent in Hong Kong at 3:14 p.m., while the Hang Seng Index slid 1 percent. The CSI 300 Index rose 1.8 percent. The ChiNext index jumped 4.8 percent.
The Shanghai Composite has tumbled 39 percent from this year’s peak in June amid increasing concerns about the outlook for the world’s second-biggest economy. Five interest-rate cuts since November and plans to boost state spending have yet to revive growth amid overcapacity and producer-price deflation. A preliminary Chinese manufacturing report on Wednesday will likely show a contraction.
Caixin Media and Markit Economics’ manufacturing Purchasing Managers’ Index, known as the flash PMI, will probably show a reading of 47.5 for September, compared with August’s 47.3, according to the median estimate of 22 economists surveyed by Bloomberg. A reading below 50 signals contraction.
China’s economy isn’t as weak as it may look, according to the third-quarter China Beige Book survey published by New York-based CBB International. “No collapse is nigh” in the aftermath of the stock market plunge and currency devaluation, the report said. Capital expenditure is rebounding slightly and the services sector shows strength, it concluded.
Gauges of technology and industrial companies rose more than 3 percent for the steepest gains among 10 groups. Leshi Internet Information & Technology Corp., the biggest mainland-listed Internet video provider, surged by the 10 percent daily limit, while East Money Information Co. gained 9.2 percent. China Spacesat Co. and China First Heavy Industries both rallied 10 percent.
On Wednesday, Xi will tour Boeing Co.’s wide-body jet factory north of Seattle. With China poised to eclipse the U.S. as an aviation market, the visit might provide a setting for one of the large aircraft orders that Chinese officials often time to state visits.
A China Railway Group-led consortium and XpressWest Enterprises LLC will form a joint venture to build a high-speed railway linking Las Vegas and Los Angeles, the first Chinese-made bullet-train project in the U.S. Construction of the 370-kilometer (230-mile) Southwest Rail Network will begin as soon as next September, according to a statement from Shu Guozeng, an official with the Communist Party’s leading group on financial and economic affairs.
China Railway Group jumped 7.1 percent on a plan to inject industrial manufacturing units into China Railway Erju Co. in exchange for assets.