Chinese Stocks Rise With Hong Kong Equities as Date Fixed

Stocks in China and Hong Kong rose after regulators said the exchange link between the city and Shanghai will start in a week, while the yuan strengthened.

Hong Kong Exchanges & Clearing Ltd. climbed 4.6 percent, its biggest advance since April. Lenovo Group Ltd. paced gains by Chinese companies in Hong Kong that don’t have a mainland listing. China State Construction Engineering Corp. surged 10 percent in Shanghai after the government approved $113 billion on building projects and President Xi Jinping pledged to boost spending on regional transport links. The yuan climbed versus the dollar after the central bank raised its reference rate by the most since June 2010.

The Shanghai Composite Index gained 2.3 percent to 2,473.67 at the close, the highest level since Nov. 15, 2011. The Hang Seng Index advanced 0.8 percent to 23,744.70. Brokers have been working overtime to get ready for the link, part of China’s efforts to boost use of the yuan and turn Shanghai into an international financial center.

“The market will get a boost from the announcement and it’s much anticipated,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment, which oversees about $120 million. “The market is expecting fund inflows. Brokerages are the main beneficiaries.”

Bourses in the two cities will begin trading through the program, which allows a net 23.5 billion yuan ($3.8 billion) a day in cross-border purchases, on Nov. 17, regulators said in a joint statement today.

The CSI 300 Index added 2.5 percent. The Hang Seng China Enterprises Index climbed 0.7 percent.

Stock Access

Data today showed China’s factory-gate prices fell for a record 32nd straight month in October and consumer inflation remained subdued. Chinese exports rose more than was estimated last month, according to data released over the weekend, sparking concern over fake invoicing as imports expanded less than expected.

HKEx closed at its highest level since Aug. 22. The link allows trading in companies on the SSE 180 Index and SSE 380 Index, which are listed on the Shanghai Stock Exchange, as well as constituents of the Hang Seng Composite LargeCap Index and Hang Seng Composite MidCap Index in Hong Kong. Stocks with dual listings are also eligible.

Among Chinese companies without a mainland listing, Lenovo, the maker of smartphones and computers, jumped 2.5 percent. Cnooc Ltd., the country’s biggest offshore oil and gas producer, climbed 1.4 percent.

Biggest Discount

The Hang Seng China AH Premium Index rose 1.6 percent to 100.8 today, signaling mainland dual-listed shares were trading at a premium to their Hong Kong counterparts. The Shanghai Composite is valued at 9.1 times 12-month projected earnings, versus a 6.8 multiple for the H-shares gauge, according to data compiled by Bloomberg.

China’s ChiNext Index of small-company stocks fell 0.5 percent. Small caps look like “losers” from the trading link as investors favor Hong Kong’s cheaper stocks, Wu Kan, a money manager at Shanghai-based Dragon Life, which oversees about $3.3 billion, said by phone from Shanghai today. The ChiNext gauge trades at 33 times future earnings.

Stocks that traded at the biggest discount in Hong Kong to their Shanghai peers rallied. First Tractor Co., which is 49 percent cheaper, advanced 16 percent. Chongqing Iron & Steel Co. surged 28 percent, trimming its discount to 44 percent. Dalian Port PDA Co. rose 24 percent.

China Minsheng Banking Corp. gained 4.6 percent in Shanghai after announcing plans to raise as much as 30 billion yuan ($4.9 billion) through sales of preferred shares.

GCL-Poly Energy Holdings Ltd., the biggest maker of polysilicon, slumped 17 percent, heading for its biggest loss since 2008, after floating a plan to sell its “crown jewel” wafer operations.

Boost Spending

“We are surprised to note that GCL-Poly is even considering to divest its crown jewel wafer business,” Pranab Kumar Sarmah, a Hong Kong-based analyst from AM Capital Ltd. said today in a note to clients. The “company’s risk profile will increase significantly,” Sarmah said.

China State Construction closed at its highest since February 2013. China’s top economic planner accelerated approvals for 693.3 billion yuan of projects, China National Radio reported Nov. 7. The next day, Xi pledged $40 billion to set up a Silk Road Fund that will finance the construction of infrastructure linking markets across Asia.

Xi is seeking to support growth in the world’s second-largest economy, which is projected to expand this year at the slowest pace since 1990 amid weakness in the property market and manufacturing.

Economic Data

China’s producer-price index dropped 2.2 percent from a year earlier, the National Bureau of Statistics said today, compared with the median projection of a 2 percent decline in a Bloomberg survey of analysts. Consumer prices rose 1.6 percent.

The country’s overseas shipments increased 11.6 percent from a year earlier, exceeding the 10.6 percent median estimate in a separate Bloomberg survey. Imports rose 4.6 percent, compared with projections of 5 percent.

The yuan advanced 0.05 percent to 6.1196 per dollar, China Foreign Exchange Trade System prices show. The offshore currency rose 0.18 percent, the most since Oct. 6, to 6.1250 as of 4:47 p.m. in Hong Kong, according to data compiled by Bloomberg. Twelve-month non-deliverable forwards climbed 0.14 percent to 6.2565.

Leaders from 21 member nations of the Asia-Pacific Economic Cooperation forum, including President Barack Obama, President Vladimir Putin and Prime Minister Shinzo Abe gather in Beijing for the group’s annual summit from today.

— With assistance by Shidong Zhang

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