Chinese Stocks Rise for Fourth Day as Financial Companies Climb

  • Money-market rates drop as central bank steps up injections
  • Services PMI growth slows from previous month in November

Chinese stocks rose for a fourth day, led by financial companies, as money-market rates dropped and speculation mounted the government will take steps to bolster growth in Asia’s largest economy.

The Shanghai Composite Index climbed 1.4 percent at the close, extending a three-day, 2.9 percent advance. China Vanke Co. and Bank of China Ltd. led a gauge of financial stocks to a four-month high, while technology stocks climbed. Yanzhou Coal Mining Co. led energy shares higher on reports the government is planning a nationwide renovation of power plants to reduce carbon emissions and air pollution. The gap between prices of dual-listed shares in Hong Kong and Shanghai grew to the widest in three months.

China’s services purchasing managers’ index released by Caixin Media and Markit Economics slowed to 51.2 in November, from 52 a month earlier. While the gauge indicates China’s efforts to shift to a consumption-based economy are working, other recent data showing a decline in exports, weakening industrial output and falling producer prices suggest further stimulus may be required to lift the country out of its worst slowdown in a quarter of a century. The nation’s benchmark money-market rate fell the most in two weeks after the central bank stepped up cash injections as new share sales resumed.

“Financials are leading again as speculation of more monetary stimulus swirled in the market,” said Clement Cheng, a trader at RBC Investment Management in Hong Kong. “Investors are positioning for the possible move.”

The CSI 300 Index advanced 0.7 percent. Hong Kong’s Hang Seng China Enterprises Index fell 0.6 percent, while the Hang Seng Index decreased 0.3 percent, snapping two days of gains. The Shanghai measure’s 10-day volatility hovered near a three-month high, with trading volume 14 percent below the 30-day average.

The Hang Seng China AH Premium Index jumped 1.9 percent to the highest level since Sept. 4, signaling dual-listed shares in Hong Kong are trading at a discount of about 42 percent to mainland peers.

The seven-day repurchase rate, a gauge of interbank funding availability, dropped four basis points to 2.29 percent after the People’s Bank of China funneled more funds into the money market through open-market operations, taking this week’s net injection to 50 billion yuan ($7.8 billion).

A gauge of technology companies jumped 2.8 percent, the most among industry groups on the CSI 300 index. Leshi Internet Information & Technology Corp. soared by the 10 percent daily limit. PetroChina Co. added 2.1 percent, leading gains among energy stocks as Brent futures rebounded from the lowest price in more than six years.

IPO Resumption

Twenty-eight IPOs, including 10 this week, will lock up 3.4 trillion yuan ($530 billion) of funds, according to a Bloomberg survey. Hubei Kailong Chemical Group Co. and other companies offered IPO shares earlier this week after the regulator ended a five-month freeze on new stock sales.

The government is switching to a new system in part because a pre-funding requirement has wrought havoc on liquidity conditions. Nearly every time a new batch of companies took orders over the past year, money-market rates climbed and stocks slumped as investors hoarded cash for their bids.

Margin traders raised holdings of shares purchased with borrowed money for a second day on Wednesday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising to 705.7 billion yuan ($110.3 billion).

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