China's Stocks Advance Most in Seven Weeks as Financials Rally

Updated on
  • PBOC inadvertently boosts shares with dated Zhou comments
  • Fujian-related companies rise as China, Taiwan leaders to meet

China’s stocks rose the most in seven weeks, led by financial and technology companies, after the government unveiled its five-year plan to bolster the economy and investors speculated on the start of a trading link between Shenzhen and Hong Kong.

The Shanghai Composite Index climbed 4.3 percent to 3,459.64 at the close, the biggest gain since Sept. 16. China’s central bank unintentionally sparked a surge in stocks by publishing five-month-old comments from governor Zhou Xiaochuan that said a link between exchanges in Shenzhen and Hong Kong would start in 2015. The Hang Seng China Enterprises Index added 2.7 percent, paring a jump of as much as 4 percent.

Nov 4 shcomp

Annual growth should be no less than 6.5 percent in the next five years to realize the goal to double 2010 gross domestic product and per capita income by 2020, President Xi Jinping said late Tuesday, according to the official Xinhua News Agency. China will also seek to increase the yuan’s convertibility in an orderly manner by 2020 and change the way it manages currency policy, according to the five-year plan. The government wants the yuan to be included in the International Monetary Fund’s Special Drawing Rights basket.

“Expectations that China will join the SDR and reforms will be stepped up seem to be the catalyst for stocks,” said Wu Kan, a Shanghai-based fund manager at JK Life Insurance Co. He’s keeping his holdings unchanged. “Technically speaking, the market has chosen a direction -- to go up -- after fluctuating for a few weeks. There’s probably still room for more upside.”

Slower Growth

The CSI 300 Index climbed 4.7 percent. The ChiNext index of smaller companies in Shenzhen jumped 6.4 percent for the biggest gain since Sept. 16. Hong Kong’s Hang Seng Index added 2.2 percent. Trading volumes in the Shanghai Composite rose to the highest level since Oct. 26 on Wednesday.

The Shanghai index has rebounded 18 percent from this year’s low on Aug. 26 as the government took measures to end a $5 trillion rout and policy makers introduced stimulus to boost economic growth, including a sixth reduction in interest rates in a year.

The 13th five-year plan is the first to confront an era of sub-7 percent growth since Deng Xiaoping opened the nation to the outside world in the late 1970s. A formal growth target is expected to be released once the plan is endorsed at a party gathering in March.

Brokerages Jump

Brokerages led gains, with Founder Securities Co. and Guosen Securities Co. surging by the 10 percent daily limit. Technology companies also jumped, with East Money Information Co. soaring 10 percent. Financial stocks pared their advance in Hong Kong after the PBOC’s clarification. Guotai Junan International Holdings Ltd. climbed 8.9 percent, trimming a rally of as much as 14 percent. Hong Kong Exchanges & Clearing Ltd. rose 4.7 percent, after jumping 9.1 percent earlier.

Zhou’s comments appeared in a lengthy article dated Tuesday that focused on the need for Communist Party discipline. It was published on the PBOC’s website without any indication that the statements were old. The central bank later said via text message that the comments were taken from a speech on May 27, while Hong Kong’s bourse said the program is still subject to regulatory approval.

“The confusion first came from the PBOC statement and second there are quite a lot of different authorities talking about the Shenzhen-Hong Kong connect,” said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong. “It seems there is no unified channel to talk about this.”

Historic Meeting

Shares of companies based in Fujian province, adjacent to Taiwan, surged after Xi and the island’s President Ma Ying-jeou agreed to meet. Fujian Cement Inc., Fujian Expressway Development Co., Xiamen International Trade Group Corp. all soared by the 10 percent daily limit. The leaders will talk in Singapore on Saturday, in the first meeting by the leaders of China and Taiwan since a civil war seven decades ago.

“The lifespan of the rally in Fujian shares depends what comes out of the meeting,” said Bernard Aw, a strategist at IG Asia Pte. in Singapore. “If they announce concrete plans to foster closer economic and business cooperation, provinces closer to Taiwan may benefit from warmer ties.”