China Stocks Rise to 8-Week High on State Company Reform Outlook

Updated on
  • Telecom stocks rise after government reorganizes industry
  • State to inject 231.4 billion yuan into new tower company

Chinese stocks rose to an eight-week high as a government plan to reorganize the telecom industry raised speculation policy makers will accelerate reforms of state-owned companies to stem slowing economic growth.

The Shanghai Composite Index climbed 2.3 percent to 3,338.07 at the close, the highest level since Aug. 21. China United Network Communications Ltd. and China Mobile Ltd. gained at least 2.7 percent after the government injected 231.4 billion yuan ($36 billion) of network assets such as base stations into a new company called China Tower Corp. 

There is “speculation regarding another wave of SOE reform,” said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group Co. in Shanghai. “The economy is slowing down and a clear, but challenging, way of supporting the economy would be to speed up SOE reform. SOE reform remains one of the most solid investment themes.”

The CSI 300 Index gained 2.4 percent. Hong Kong’s Hang Seng China Enterprises Index advanced 2.1 percent, while the Hang Seng Index added 2 percent.

Growth Measures

The Shanghai Composite has rebounded 14 percent from an August low amid speculation that policy makers will introduce more measures to boost growth after a rout in equities that erased almost $5 trillion of market value. The Communist Party meets for its fifth plenary session starting Oct. 26. Data released this week showed consumer prices rose at a slower-than-estimated pace in September, leaving more room to ease monetary policy.

Trading volumes in the Shanghai index were 7 percent higher than the 30-day average on Thursday. Volumes rose to the highest in a month and margin debt expanded the most since Dec. 8 on Monday as the rally lured investors back to the market.

Official data due on Oct. 19 will show China’s economy grew 6.8 percent in the third quarter, the slowest pace since March 2009, according to the median estimate of 25 economists in a Bloomberg survey. The government’s growth target for this year is 7 percent.

China Tower

China United, which controls Hong Kong-listed China Unicom (Hong Kong) Ltd., jumped 5.5 percent, the biggest gain since Aug. 28. China Mobile advanced 2.7 percent in Hong Kong. China Tower will be 38 percent owned by market leader China Mobile, according to a statement. Smaller rivals and China Telecom Corp. will each have about 28 percent.

Gauges of telecom and technology stocks led gains in industry groups on the CSI 300. Dr. Peng Telecom & Media Group Co. climbed 4.7 percent while Suning Commerce Group Co., China’s biggest electronics retailer, rose 4.9 percent.

The Communist Party of China Central Committee will hold a key meeting during Oct. 26-29 to deliberate on an economic and social development plan for China over the next five years, according to the official Xinhua News Agency.

China also pledged to spend more than 140 billion yuan on rural broadband by 2020, encouraging investment from local governments, telecommunication companies and private investors, the State Council said in a statement after a meeting chaired by Premier Li Keqiang on Wednesday. The nation wants to stimulate e-commerce to help create startups and boost rural employment, it said.

Margin traders increased holdings of shares purchased with borrowed money for a fifth day on Wednesday, the longest expansion since the seven days through Aug. 17. The outstanding balance of margin debt on the Shanghai Stock Exchange rose to 595.5 billion yuan.

The People’s Bank of China said after the market close that aggregate financing rose to 1.3 trillion yuan in September, from an originally reported 1.08 trillion yuan a month earlier. That exceeded the median estimate of 1.2 trillion yuan in a survey of economists.

— With assistance by Shidong Zhang

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