Chinese Stocks Rise to Three-Week High in Hong Kong on Brokers

  • Guotai Junan rallies after chairman resumes his duties
  • Speculation of reserve-ratio cuts also fuel share gains

Chinese stocks rose to a three-week high in Hong Kong as brokerages rallied after Guotai Junan International Holdings Ltd. said its chairman will resume his duties and Haitong Securities Co. halted a share buyback plan announced during the midst of the rout for mainland stocks.

Hong Kong’s Hang Seng China Enterprises Index increased 1.6 percent at the close. Guotai Junan jumped the most in seven weeks, while Haitong Securities advanced to a one-month high. Oil companies also rallied, led by PetroChina Co. and China Petroleum & Chemical Corp. The Shanghai Composite Index fell 0.4 percent, halting two days of gains.

The return of Yim Fung as chairman and chief executive officer of Guotai Junan after a five-week absence to aid investigations by Chinese authorities will alleviate investor concerns, according to Phillip Securities Research. The government has been clamping down on malpractice in the securities industry since the $5 trillion rout this summer.

“The news of Guotai Junan’s chairman returning to work is bolstering gains in the brokerage,” said William Wong, head of equities sales trading at Shenwan Hongyuan Group Co. in Hong Kong. “There’s some bargain hunting as losses in the sector were excessive.”

Chinese brokerages have been among the worst performers in Hong Kong this year, with Citic Securities Co. and Haitong Securities dropping at least 28 percent. At least several Citic Securities’ executives including President Cheng Boming have been caught up in investigations to determine the causes of the stock plunge. Haitong Securities said last month it was being probed by the China Securities Regulatory Commission for alleged rule violations.

Mainland Rally

The Shanghai Composite has rallied 19 percent this quarter, heading for the biggest gain among global benchmark measures tracked by Bloomberg, after the government took measures to prop up equities and cut interest rates six times within a year. China’s leaders signaled this week they’ll do more to prevent a deeper economic slowdown, including widening the fiscal deficit and providing more support to the property market.

“Sentiment is being buoyed by expectations that the central bank will cut banks’ reserve ratios before year end,” said Wong. “The market could stage a further rebound from here.”

The People’s Bank of China will lower the benchmark one-year lending rate to 3.85 percent by the end of 2016 from 4.35 percent now, according to the median forecast of economists surveyed Dec. 17 to Dec. 22. Major banks’ reserve required ratio -- the proportion of deposits that must be locked away at the central bank -- will be 15 percent by the end of 2016, from 17.5 percent, the survey showed.

Trading Wanes

The CSI 300 Index slid 0.3 percent, dragged down by material producers. Hong Kong’s Hang Seng Index climbed 1 percent, rising for a third day. Trading volumes in Hong Kong were 33 percent below the 30-day average, while those in Shanghai were 9 percent higher.

Guotai Junan rallied 8.1 percent in Hong Kong, the most since Nov. 4. Citic Securities jumped 2.5 percent in Hong Kong and soared 6.1 percent in Shanghai. Haitong Securities surged at least 2.6 percent in the two cities. Some bondholders had asked for additional guarantees if Haitong went ahead with the buyback, the brokerage told Shanghai’s stock exchange on Tuesday.

“The CSRC had encouraged Chinese companies to buy back their shares to support the equity market during the stock rout,” said Liu Dongliang, a senior credit analyst at China Merchants Bank Co. in Shenzhen. “But now the equity market has improved so many brokerages don’t want to use their cash to buy back shares any more.”

China may speed up initial public offerings next year as a registration system is likely to be introduced in the first half, the China Securities Journal reported.

China Petroleum, known as Sinopec, and PetroChina climbed at least 3.3 percent in Hong Kong. Oil increased above $36 a barrel in New York.

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