Shanghai Stocks Post Longest Weekly Winning Streak Since 2012Weiyi Lim
China’s stocks rose, sending the benchmark index to a sixth week of gains for the longest winning streak since March 2012. Power producers, media companies and household-appliance makers led the advance.
Hubei Energy Group Co. surged to an eight-month high as utilities posted the steepest gain among industry groups. Midea Group Co., the household-appliance maker that reported a 150 percent surge in profit, climbed to a record. People.cn Co., the online unit of the Communist Party’s newspaper, jumped 6 percent, extending this week’s rally to 38 percent. Changbai Mountain Tourism Co. gained 44 percent in its Shanghai debut.
The Shanghai Composite Index rose 0.5 percent to 2,240.81 at the close. The measure climbed 0.6 percent this week, extending gains to 12 percent since mid-March, amid speculation China will reduce government ownership of state-owned enterprises and a link between the exchanges in Hong Kong and Shanghai will fuel fund inflows.
“In the mid-term, investors are eyeing more stimulus and looking forward to SOE reforms, consolidation of industries and fund flows due to Hong Kong-Shanghai connect,” Xu Shengjun, an analyst at Jianghai Securities, said in Shanghai. “Unless data is really bad for the rest of the month, the rally should continue.”
The CSI 300 Index increased 0.5 percent. The Hang Seng China Enterprises Index advanced 0.7 percent at 3:11 p.m. The Bloomberg China-US Equity Index dropped 0.8 percent. Trading volumes in the Shanghai index were 3.2 percent higher the 30-day average, according to data compiled by Bloomberg. The gauge is valued at 8.2 times 12-month projected earnings, compared with 9 for the Hang Seng China index.
Chinese leaders pledged in November to give market forces a bigger role in the world’s second-largest economy, including reducing government ownership of state-owned enterprises and allowing employee stock-incentive plans at those businesses.
President Xi Jinping said the government would set up a few media groups with high credibility and influence, the official Xinhua News Agency reported on Aug. 18. Zhe Jiang Daily Media Group Co. retreated 2.3 percent, paring this week’s rally to 36 percent.
Bank of Communications Co., the Chinese bank part-owned by HSBC Holdings Plc, said it wants to be the nation’s first listed lender to offer stock incentives for management. The shares gained 0.5 percent.
Midea Group surged 3.7 percent. China is considering a plan to offer subsidies to encourage wider use of energy-saving appliances, according to people familiar with the matter. The plan targets makers of appliances including energy-efficient air conditioners and refrigerators, said the people, who asked not to be identified because they weren’t authorized to speak publicly about the matter.
In an Aug. 6 statement, the National Development and Reform Commission said it wanted to start a new program to encourage innovation and adoption of energy-efficient technology. Any such program would likely include subsidies and benefit large producers, crowding out smaller ones, China International Capital Corp. analysts Wei He and Haiyan Guo wrote in an Aug. 11 report. They recommended buying shares of Midea, Haier Electronics Group Co. and Qingdao Haier Co.
Yesterday’s manufacturing data signal a weakening of the economic recovery, hurting fundamental support for a stock rebound, Mao Changqing and Qin Peijing, analysts at Citic Securities Co. wrote in a report today. Citic recommended consumer stocks and thematic investment associated with Shanghai-Hong Kong Connect and state-owned enterprise reform.
The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics, known as the flash PMI, was at 50.3 in August, missing the 51.5 median estimate of analysts. The flash PMI numbers follow data last week that showed a slump in credit expansion and slowing growth in investment spending and factory production in July.