China Stocks in Hong Kong Post Biggest Weekly Advance in a Month

  • Rebound mainly to do with battered valuations, analyst says
  • Shanghai index holds above 2,800 on suspected intervention

The Good, Bad and Ugly on China's Economy

Chinese stocks traded in Hong Kong headed for a weekly advance, the first in a month, as investors took advantage of recent declines to add to their holdings.

The Hang Seng China Enterprises Index rose 0.7 percent to erase a weekly loss, with financial, energy and material shares in the lead. Anhui Conch Cement Co. posted the the biggest gain in a month amid signs of increasing demand for the building material, while China Shenhua Energy Co. and China Pacific Insurance Co. jumped at least 1.8 percent each. On the mainland, the Shanghai Composite Index posted the longest run of weekly declines since 2012.

The H-shares gauge has plunged 7 percent so far this month, the most in Asia, pushing technical indicators toward oversold levels this week. The index trades at 6.7 times projected 12-month earnings, compared with an all-time low of 5.8 set in February. Chinese stocks have fallen amid concern a weak yuan will exacerbate outflows, while official data show growth in industrial production, fixed-asset investment and retail sales all slowed in April.

“The rebound in Hong Kong is being driven mainly by battered valuations,” said Ronald Wan, chief executive at Partners Capital International in Hong Kong.

Mainland Buying

The H-shares index closed at 8,303.6, while the Hang Seng Index added 0.8 percent. The Shanghai Composite climbed 0.7 percent at the close, paring a weekly loss to 0.1 percent. The gauge has tumbled 8.2 percent in the past five weeks. The CSI 300 Index rose 0.5 percent on Friday.

Mainland investors this week bought the most number of Hong Kong shares via a link with the Shanghai Stock Exchange since April 2015 as a visit by the Communist Party’s No. 3 official to the city raised speculation that a similar link with the Shenzhen bourse would start soon. Top officials from the China Securities Regulatory Commission have said that the link will begin this year.

The Hang Seng China AH Premium index, which measures the price gap between dual-listed shares in China and Hong Kong, closed at the highest level since April 5 on Thursday.

The Shanghai gauge closed within a range of less than 50 points since the beginning of last week as suspected buying by state-backed funds prevented the index from ending below 2,800, according to Li Jingyuan, general manager at Shanghai Bingsheng Asset Management.

Anhui Conch, the biggest cement producer, gained 2.2 percent in Hong Kong. China’s cement production rose 2.8 percent in April from a year earlier to 220 million tons, suggesting a continued rebound of infrastructure demand, according to Bloomberg Intelligence analyst Michelle Leung.

China Shenhua, the nation’s largest coal producer, surged 2.8 percent, and China Pacific gained 1.2 percent in Hong Kong. GF Securities Co. climbed 0.6 percent.

— With assistance by Shidong Zhang, and Fox Hu

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