China’s Stocks Complete Second Weekly Gain on Stimulus Optimism

Updated on
  • Property developers, consumer companies lead advance this week
  • China Cosco plunges to pace declines for shipping companies

China’s stocks capped a second week of gains, led by real estate and consumer companies, amid speculation the government will take more measures to stem an economic slowdown.

The Shanghai Composite Index rose 1.4 percent this week and traded 0.4 percent higher at 3,627.91 at the close on Friday. Property developers rallied after the government said it will encourage rural residents to buy homes to reduce inventories and a bidding war for China Vanke Co. erupted. Gree Electric Appliances Inc. jumped 10 percent in the past five days. Trading volumes in Shanghai were 26 percent lower on Friday than the 30-day average as most Asian markets closed for the Christmas holiday.

With an economy poised to grow at the slowest pace in two decades, policy makers signaled at a top leadership conference this week they will increase fiscal spending and introduce measures to stimulate the housing market. The government may also unveil policies to boost trade by early February, including an export tax rebate and an easing in exporters’ tax burdens, the Economic Information Daily reported, without citing anyone.

“The measures can prevent the economy from slowing too quickly and that’ll give the market some confidence,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co., who’s keeping his stock allocation unchanged at about 80 percent. “There’s a holiday mood and not much interest in trading stocks.”

Best Performance

The Shanghai gauge has rebounded 24 percent from the August low and is heading for the biggest gain among major benchmark global indexes this quarter. It’s valued at 14.1 times estimated 12-month earnings, compared with the five-year average of 10.3, according to data compiled by Bloomberg.

The Shanghai property index rose 0.8 percent, extending gains this week to 2.4 percent. Gemdale Corp. added 1.3 percent for a five-day, 13 percent advance. China Vanke rose to an eight-year high before trading was suspended on Dec. 18 pending an asset restructuring, which analysts said may defend the biggest listed Chinese developer from a hostile bid by Baoneng Group.

Monetary policy must be more “flexible” and fiscal policy more “forceful” as leaders create “appropriate monetary conditions for structural reforms,” according to statements released at the end of Central Economic Work Conference by the official Xinhua News Agency on Monday. Reducing home prices is part of efforts to cut inventory, while out-of-date restrictions on home ownership shall be removed, Xinhua said.

Strategic Board

The CSI 300 Index added 0.2 percent as gains for consumer shares overshadowed losses for shipping companies. Hong Kong’s bourse was closed for the holidays.

Hisense Electric Co. gained 3.4 percent, halting three days of losses. China Cosco Holdings Co. fell 4.8 percent, while China Shipping Container Lines Co. dropped 4.2 percent. The two stocks resumed trading after being suspended since Aug. 10. China Cosco parent China Ocean Shipping Group and China Shipping Group will consolidate operations, the State Council’s State-owned Assets Supervision and Administration Commission said this month.

“Substantial progress” will be made to set up the strategic emerging board on the Shanghai Stock Exchange next year, the Xinhua News Agency reported, citing Huo Da, a director at the securities regulator. It will compete with Shenzhen’s ChiNext in attracting new listings of smaller companies, particularly those in the technology and service industries.

The new board may lead growth stocks higher in the second half of next year, while big caps may be held back by slowing growth, Chen Zhenpu, a Shanghai-based fund manager at HFT Investment Management Co., said in an interview on Thursday.

— With assistance by Shidong Zhang

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