China’s Stocks Post Biggest Weekly Gain in 19 Months on StimulusWeiyi Lim
China’s stocks rose for a sixth day, capping the benchmark index’s biggest weekly gain in 19 months, amid speculation the government is accelerating measures to support the economy and reverse a four-year slump in equities.
Haitong Securities Co. advanced 1.6 percent for a sixth day of gains on the prospect a recent jump in share trading will boost earnings. CSR Corp. and China CNR Corp., the nation’s two biggest train makers, jumped at least 2.1 percent after a Caixin report the government wants them to merge. The two companies said no plans had been submitted. Anhui Xinhua Media Co. slid 0.9 percent, paring this week’s rally to 12 percent.
The Shanghai Composite Index rose 0.9 percent to 2,326.43 at the close, extending this week’s gain to 4.9 percent. Bocom International Holdings strategist Hao Hong turned positive on Chinese stocks, saying measures including cutting margin requirements on index-futures contracts and providing financing support to developers led him to change his cautious view.
“From a trading perspective, these are positive developments that are difficult to ignore,” Hong said in a report today. “So is the government’s intent to revive the market. Even though economic fundamentals will continue to look weak, it is time to throw our senses out of the window, and buy the dips that will likely push new highs in the coming weeks.”
The Hang Seng China Enterprises Index dropped 0.3 percent at 3:18 p.m., paring the weekly advance to 3.8 percent. The CSI 300 Index rose 1 percent, extending this week’s gain to 4.8 percent. The Bloomberg China-US Equity Index rose 0.1 percent. China’s financial markets will be closed Sept. 8 for a national holiday.
The Shanghai index posted its biggest weekly gain since Feb. 2013 after gauges of services industries jumped and the Xinhua News Agency published at least eight articles advocating equity investing, part of what Everbright Securities Co. says is an increased government push to bolster the market.
“There are increased expectations for reforms,” said Zhou Lin, an analyst at Huatai Securities. “Plus, we keep seeing all the positive news on Xinhua. It’s boosting confidence. You can see volume has increased and sentiment has improved. After such a long rally, we may see some correction but the upward trend is here to stay.”
Bocom’s Hong said a “slew of supporting” policies and state media editorials advocating equities have led him to recommend buying on dips. These policies include developers allowed to issue debt in the interbank market, the central bank using targeted monetary policy to cut interest rates for agricultural lending and property curbs being eased in many cities, he said.
China said this month it will reduce fees by more than half for individuals and institutions opening share accounts, while the futures exchange cut margin requirements for equity-index contracts on Sept. 1.
The Shanghai index has rebounded 17 percent since mid-March on speculation China will reduce ownership of state-owned enterprises to make them more market-oriented and a link between exchanges in Hong Kong and Shanghai that will allow investors mutual access to stocks will fuel inflows. Still, the measure has fallen 29 percent since the start of 2010.
A gauge of industrial stocks in the CSI 300 rose 2.4 percent today, the biggest gain among 10 industry groups. China CNR added 2.5 percent, while CSR advanced 2.1 percent.
China’s State-Owned Assets Supervision and Administration Commission, or SASAC, is seeking the merger of CSR and China CNR to help the export of China’s high-speed railway technologies, Caixin reported on its website Sept. 3, citing people it didn’t identify. The proposal was still at an early stage because China Railway Corp., the state monopoly that owns the rail network, opposes the move, the report said. The two companies said no plans had been submitted.
“We think their announcements actually did not deny that SASAC is pushing the merger and it will be in the charge of the State Council,” Phyllis Wang, an analyst at Deutsche Bank AG, said in a note dated today. “In our view, the merger possibility still exists.”
China is also pressing to overhaul the shipping industry by encouraging private investment in state-owned companies as well as promoting mixed-ownership. Ningbo Port Co. led a rally for port operators, surging 10 percent. Shipbuilder China CSSC Holdings Ltd. also advanced 10 percent.
Anhui Xinhua Media fell the most in a week. People.cn Co., the online unit of the Communist Party’s newspaper, lost 1.2 percent, paring a monthly rally to 44 percent.
China will create several media groups that are strong, influential and credible while promoting the integration of new and traditional media, the official Xinhua News Agency cited President Xi Jinping as saying last month. The government is revamping state-controlled media firms as part of a broader campaign to reform government companies and reduce corruption, according to Tebon Securities Co.