Chinese stocks rose, paring the benchmark index’s biggest quarterly loss since 2008, as a rally for technology companies overshadowed a report showing industrial companies’ profits dropping the most in at least four years.
The Shanghai Composite Index climbed 0.3 percent to 3,100.76 at the close, erasing a loss of as much as 1.6 percent. About four stocks advanced for each one that fell as turnover plunged before the start of a week-long holiday from this week. Wangsu Science & Technology Co. jumped 10 percent. Hong Kong’s stock market was shut for the Mid-Autumn festival.
“The industrial profit figure was well below the market consensus figure,” said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group Co. in Shanghai. “There was little activity in the market with a long holiday coming later this week.”
The Shanghai gauge has fallen 28 percent this quarter, heading for the worst three-month period since March 2008, as leveraged investors fled the stock market amid concerns valuations weren’t justified amid a weakening economy. Trading volumes in Shanghai plunged 55 percent below the 30-day average before the National Day holiday that starts on Oct. 1.
Industrial companies’ profits dropped 8.8 percent to 448.1 billion yuan last month from a year earlier, the National Bureau of Statistics said on its website. That’s the steepest loss since at least October 2011, when the government began releasing monthly data. Profits in coal mining plunged 64.9 percent, while oil and gas profits tumbled 67.3 percent, according to the report.
Coupled with overcapacity and deflation, slumping profits are the latest sign China’s 2015 growth target of 7 percent is at risk. Preliminary data this month showed a factory gauge falling to the lowest level since the depths of the global financial crisis, while economists surveyed by Bloomberg expect the government will further cut its growth forecast next year.
The CSI 300 Index climbed 0.3 percent, led by a 3.6 percent jump for a sub-index of technology companies. Leshi Internet Information & Technology Corp. surged 10 percent, while Hundsun Technologies Inc., which has a financial investment platform known as HOMS that allows trust firms and online lenders to provide leveraged trading facilities to clients, jumped 4.4 percent.
China needs another month to get rid of unregulated margin debt, leaving stocks poised to rebound from around November, according to Bocom International Holdings Co.
The nation had cleared up 69 percent of non-compliant margin lending accounts as of Sept. 23, China Securities Regulatory Commission spokesman Zhang Xiaojun said at a briefing on Friday. A rapid increase in leverage fueled the Shanghai Composite’s doubling from November through mid-June, and deepened the rout on the way down as traders unwound positions amid a government crackdown on shadow financing.
"China needs one more month or so to fully squeeze out non-brokerage margin debt, so it’s highly likely this will be done by the end of October," Jupiter Zheng, a Hong Kong-based analyst at Bocom International, said in an interview. “The stock market will then recover from November as market sentiment improves."
— With assistance by Shidong Zhang, and Kyoungwha Kim