China Stocks Post Weekly Gain on Housing Data as Small-Caps Jump

  • February figures show efforts to clear home glut are working
  • Concern about oversupply of shares from emerging board eases

China’s stocks posted their steepest weekly gain since November in heavy trading as a recovery in the property market accelerated, the yuan strengthened and small-company shares rallied amid easing concern about oversupply of equities.

The Shanghai Composite Index added 1.7 percent at Friday’s close in volumes that were 59 percent above the 30-day average. The ChiNext Index of smaller companies capped a record weekly jump. New-home prices gained in 47 cities in February, compared with 38 in January, the National Bureau of Statistics said Friday. The yuan headed for the biggest two-day gain in a month.

The recovery in property prices shows efforts to clear a home glut are bearing fruit after banks eased credit and the government relaxed curbs. Concern that increased share supply would further weigh on the world’s worst-performing bourse this year has receded after the government said a new registration-based system for new shares would take time and left out the phrase “setting up strategic emerging industries board” from its latest economic five-year plan. The Federal Reserve on Wednesday left its policy rate unchanged and its officials scaled back their forecasts for rate increases in 2016.

“The market environment has improved with the Fed decision to keep rates unchanged, the yuan avoiding further depreciation and the delay in IPO registration reform that will avoid an immediate share glut,” said Shen Zhengyang, an analyst at Northeast Securities Co. in Shanghai. “People are betting the market will rise further.”

The Shanghai Composite added 5.2 percent this week to 2,955.15. The ChiNext index in Shenzhen gained 4.3 percent on Friday, adding to a 13 percent surge this week, while the Shenzhen Composite Index completed its biggest five-day advance since June. The CSI 300 Index added 1.5 percent on Friday.

Liu Shiyu, chairman of the China Securities Regulatory Commission, said it’s too early to think about the state rescue fund leaving the market, while a new registration-based system for IPOs would take time. He vowed to step in “decisively” if needed to curb panic and defended intervention following last summer’s $5 trillion selloff. The Shanghai gauge has declined 17 percent this year, the most among 93 global indexes tracked by Bloomberg.

An envisioned strategic emerging industries board in Shanghai had been expected to carry lower listing requirements and offer a fresh fundraising venue for emerging companies including Alibaba Group Holding Ltd.’s financial affiliate and Baidu Inc.’s video service.

“Investors’ concerns about stock supply and fund flows have eased,” SouthWest Securities Co. strategist Zhang Gang said by phone.

Small-Caps Rally

A gauge of technology shares rallied the most among industry groups on the CSI 300, as Hundsun Technologies Inc. and East Money Information Co. surged by the 10 percent daily limit for a second day. Hundsun rose even as the company said its HOMS software system, which facilitates non-brokerage margin lending, won’t be restarted. There was speculation that some commercial banks have resumed non-brokerage margin lending, which was banned by regulators last summer, Guotai Junan Securities wrote in a note Thursday.

The ChiNext pared its 2016 losses to 20 percent after this week’s rally. Companies on the gauge posted 27.8 percent profit growth in 2015, the fastest rate in five years, Xinhua News Agency reported this month.

“The ChiNext is taking the lead again as news of resuming margin lending heartened investors,” said Clement Cheng, a Hong Kong-based trader at RBC Investment Management Asia Ltd.

Hong Kong’s Hang Seng Index climbed 0.8 percent at the close, capping a fifth week of gains, its longest rising streak since May. The Hang Seng China Enterprises Index rose 1.2 percent. Tencent Holdings Ltd. jumped 3.7 percent to its highest level since June after the company posted a better-than-expected 45 percent jump in quarterly sales.

The yuan headed for its highest close this year after the People’s Bank of China raised its reference rate by the most since November following a decline in the dollar.

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