- Government likely wants to keep gauge above 3,000, Huaxi says
- Yuan pares decline as bears seen testing PBOC tolerance level
Chinese shares rose in afternoon trading, with consumer and industrial stocks leading the advance, amid speculation state-run funds intervened in both the equity and currency markets.
The Shanghai Composite Index climbed 0.6 percent, the most in three weeks, after declining toward the 3,000 mark earlier. Great Wall Motor Co. added 1.9 percent on a surge in sales, while CSSC Offshore & Marine Engineering Group Co. advanced 4 percent. A gauge of Chinese stocks traded in Hong Kong closed at the highest level since December, while the ChiNext measure of smaller companies rose to a one-month high.
The Shanghai benchmark has moved less than 1 percent on a daily closing basis in the past three weeks, with yuan declines and lackluster economic data hurting sentiment. China is scheduled to release a set of August economic data this week, with foreign trade due on Thursday and inflation the following day. Exports probably fell 4 percent from a year earlier while inflation slowed to 1.7 percent, according to median estimates in Bloomberg surveys.
“The government seems to want to keep the market above the 3,000 level,” said Wei Wei, an analyst at Huaxi Securities Co. in Shanghai. “Every time we see the index approach 3,000, there’s always some suspected buying. Given the economy isn’t likely to be in good shape in the third and fourth quarter, the national team is an important force to stabilize the market.”
In the currency market, the yuan fell 0.05 percent to 6.6808 a dollar as of 4:15 p.m. in Shanghai after dropping as much as 0.16 percent toward a six-year low. Traders were testing the psychologically important level of 6.7, but the central bank may have tried to support the exchange rate later, said Kenix Lai, a Hong Kong-based foreign-exchange analyst at Bank of East Asia Ltd.
Steep gains toward the close of trading have boosted speculation of state intervention in the past. China’s authorities have been known to intervene in mainland markets before key national events, including this year’s National People’s Congress and last year’s military parade celebrating the 70th anniversary of victory over Japan during World War II.
The Shanghai Composite closed at 3,090.71, after declining 0.6 percent earlier. The Hang Seng Index climbed 0.6 percent, with its 14-day relative strength gauge rising to 77, beyond the 70 level that suggests to some traders a rally is overdone. HSBC Holdings Plc fell 0.1 percent after a momentum indicator surged to levels last seen before Britain returned Hong Kong to China in 1997.
“The market is overbought and overheated in the short term,” said Wu Kan, a fund manager at JK Life Insurance Co. in Shanghai, in a reference to Hong Kong stocks. “A one-day big drop or wild fluctuation is very likely to happen any time. From the valuation perspective, the market is still cheaper than the mainland market even after the rebound.”
Gree Electric Appliances Inc., China’s largest maker of home air-conditioners climbed for a third day on the mainland as it resumed trading following a seven-month suspension. Beijing Water Business Doctor Co. and Julong Co. paced increases among companies on the ChiNext index with advances of at least 6 percent.
Tencent Holdings Ltd. added 2.3 percent in Hong Kong after surpassing China Mobile Ltd. to become China’s most valuable corporation. Guangzhou Automobile Group Co. gained 3.5 percent after saying vehicle sales increased in August.
— With assistance by Shidong Zhang