Chinese Stocks Rally on Thin Volume as Financial Companies Climb

  • Telecom stocks drop as ex-Unicom chief probed for `violations'
  • Evergrande jumps after announcing $1.1 billion property deal

China’s stocks rebounded from the biggest drop in a month as financial companies advanced and turnover waned before year-end holidays.

The Shanghai Composite Index gained 0.9 percent to 3,563.74 at the close after meandering in the morning session on volumes 30 percent below the 30-day average. The gauge tumbled 2.6 percent on Monday after data showed falling industrial company profits and concern grew that a new system for initial public offerings will weaken demand for existing stocks. Dongxing Securities Co. led gains by brokerages.

The Shanghai gauge has climbed 22 percent from its August low as the state intervened to stem a $5 trillion equity-market rout and investors speculated the government will do more to boost growth. Policy makers have signaled they will increase fiscal spending and introduce measures to stimulate the housing market as the economy expands at its weakest pace in two decades. Technology stocks have led the rebound on bets China will succeed in transitioning to a consumer-led economy from one dependent on investment.

“Investors are on the sidelines towards the end of the year,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., who’s keeping his stock allocation unchanged. “We still like new-economy stocks that fit well with the theme of China’s economic transformation.”

Annual Gain

Even after the biggest-ever destruction of Chinese stock-market value this year, the Shanghai Composite is up 10 percent, extending last year’s 53 percent jump.

The CSI 300 Index gained 0.9 percent on Tuesday. Hong Kong’s Hang Seng China Enterprises Index closed little changed, while the Hang Seng Index added 0.4 percent. A gauge of financial stocks advanced 0.9 percent. Huaxia Bank Co. climbed 3.2 percent after PICC Property & Casualty Co. bought a 20 percent stake in the lender from Deutsche Bank AG.

China United Network Communications Ltd., which controls China Unicom (Hong Kong) Ltd., lost 1.1 percent on concerns the telecom industry will be hurt by the latest anti-graft campaign. China’s Central Commission for Discipline Inspection said Sunday that Chang Xiaobing, who headed China Unicom for more than a decade before becoming chairman and chief executive officer of China Telecom in September, is being probed for severe disciplinary violations.

Share Halt

Evergrande Real Estate Group Ltd. shares jumped 4.6 percent in Hong Kong after being suspended in morning trading. New World China Land Ltd. said it has signed an agreement to sell property projects in the Chinese cities of Guiyang and Chengdu to Evergrande for a total 7.3 billion yuan ($1.1 billion).

Evergrande said last week that it will raise $1.5 billion by selling convertible securities to investors including New World Development Co.

The Shanghai B-share index rebounded 2.5 percent after slumping 7.9 percent on Monday, the steepest loss in four months. China’s B-share markets, which are traded in U.S. dollars in Shanghai and Hong Kong dollars in Shenzhen, are open to domestic individual investors and overseas investors.

China’s regulator of foreign exchange said last Monday the tumble in B shares had nothing to do with its new monitoring system. The start of a monitoring system for individual foreign-exchange transactions on Jan. 1 wasn’t related to fluctuations in the capital market, the State Administration of Foreign Exchange said on its microblog. The system doesn’t involve adjustment on individual use of foreign exchange, it said.

— With assistance by Shidong Zhang

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE