China Stocks Rise to Two-Week High in Hong Kong; Shanghai Falls

  • Hang Seng China index heads for best week since April
  • China's January inflation picks up on rising food costs

Chinese stocks rose to the highest level in two weeks in Hong Kong, joining a global equity rebound as oil prices advanced. Mainland equities dropped for the first time in three days after the release of inflation data.

Hong Kong’s Hang Seng China Enterprises Index climbed 3 percent to 8,166.47 at the close, led by financial and oil companies. The so-called H-shares gauge headed for its biggest weekly advance since April after valuations dropped to a record low last week. The Shanghai Composite Index slipped 0.2 percent. Consumer shares retreated after a government report showed inflation picked up in January on rising food prices.

“H shares are more influenced by global sentiment and capital flows, and it’s also easy for the market to stage a rebound when valuations are at a bargain price,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co. He’s keeping his stock holdings unchanged.

The Chinese equity measure traded at 5.6 times reported earnings last week, the lowest since at least 2001, according to data compiled by Bloomberg. Cheap valuations have spurred fund managers including Mark Mobius to say this week that they see bargains after the H-shares gauge plunged more than 40 percent from its May high. The Hang Seng China AH Premium Index dropped to an almost two-week low as H shares extended this week’s rally to 8.8 percent. 

Gains in global stocks have returned virtually as fast as the losses that sent them into a bear market last week. Oil’s rebound coupled with the Federal Reserve’s acknowledgment of market gyrations has underpinned the recovery. Oil extended gains above $31 a barrel on Thursday as Iran supported a proposal by Saudi Arabia and Russia to freeze production at near-record levels.

PetroChina Co. advanced 6 percent in Hong Kong. China Oilfield Services Ltd. jumped 10 percent for the biggest gain since Oct. 7. Ping An Insurance Group Co. surged 4 percent to lead an advance for financial companies. Sany Heavy Industry Co., the biggest maker of construction machinery, soared 10 percent after announcing a five-year, 6 billion yuan ($921 million) construction plan in the city of Kunshan, near Shanghai.

The consumer-price index rose 1.8 percent in January from a year earlier, the National Bureau of Statistics said Thursday, compared with 1.6 percent a month earlier. The producer-price index fell 5.3 percent, compared to a 5.9 percent decrease in December, extending declines to a record 47 months.

Gauge of consumer-staples and discretionary companies in the CSI 300 slipped at least 0.7 percent for the worst performances among 10 industry groups. Yonghui Superstores Co. dropped 1.5 percent, while Suning Commerce Group Co. lost 1.9 percent.

After rallying by the most in three months on Tuesday, the Shanghai index has lost momentum amid concern a surge in lending may increase risks for the economy. The outlook for A shares is challenging because of poor economic and earnings growth trends, Morgan Stanley’s Hong Kong-based equity strategist Jonathan Garner wrote in a note dated Thursday. The Shanghai Composite may finish the year at 2,900 under a base-case scenario, Garner said. That represents a 1.1 percent increase from Wednesday’s close.

— With assistance by Shidong Zhang

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