China H Shares Post Best Week Since March as GDP Beats Estimates

  • June aggregate financing, retail sales also exceed forecasts
  • Investors are positive about stocks amid ample liquidity: CCB

The Takeaways From China's 2nd-Qtr GDP Numbers

Chinese stocks in Hong Kong capped their steepest weekly advance in four months, extending gains after a report showed the nation’s economy expanded more than expected in the second quarter.

The Hang Seng China Enterprises Index added 0.4 percent at the close of trading, taking its rise this week to 6 percent. BYD Co. jumped the most in five months after Samsung Electronics Co. said it’s in talks to invest in the Chinese electric car maker. The Shanghai Composite Index climbed for a third week. China’s gross domestic product rose 6.7 percent in the April-June period, exceeding estimates for a 6.6 percent expansion, while aggregate financing jumped.

The data added to signs of a recovery in China’s economy, with lending and consumer spending perking up in June in response to stepped up monetary and fiscal policy support. A surge in aggregate financing, the broadest measure of new credit, suggests cash taps remain open as the central bank seeks to prop up growth. Speculation that policy makers will boost stimulus has underpinned equities in recent weeks, with mainland shares ranking among the world’s best performers since Britain’s June 23 vote to leave the European Union.

“The market has been more positive about equities because global liquidity is ample and economic data are improving,” said Peter So, co-head of research at CCB International Securities Ltd. in Hong Kong. “But after rising quickly recently, further gains are meeting resistance.”

The Hang Seng China gauge closed at 9,049.66, after rising every day this week. The Hang Seng Index extended its weekly gain to 5.3 percent, its best since April 2015. The Shanghai Composite Index added 2.2 percent during the week as it ended little changed on Friday.

New Loans

The second-quarter GDP growth is in line with the government’s target of at least 6.5 percent for the full year. Industrial production increased 6.2 percent in June from a year earlier, compared with 6 percent in May and economists’ projections for 5.9 percent. Retail sales rose 10.6 percent, versus the median estimate of 9.9 percent.

Aggregate financing rose to 1.63 trillion yuan ($244 billion) in June compared with forecasts of 1.1 trillion yuan. New yuan loans climbed to 1.38 trillion yuan, while the estimate was 1 trillion yuan.

China’s factory-gauge deflation eased for a sixth straight month in June, while exports and imports declined to signal weak demand at home and abroad, according to data released over the past week.

“The GDP number is in line with general expectations,” said Chen Xingdong, the chief China economist at BNP Paribas SA in Beijing. “The government is unlikely to pursue monetary easing in any active way. Whether China can achieve its growth target this year depends on a lot of private-sector investments, which are under downward pressure.”

BYD’s Rally

BYD surged 5.2 percent to its highest level since June 2015. Investing in the auto maker would bolster Samsung’s semiconductor business for cars, the South Korean company said Friday in an e-mailed statement. Details including the size of the investment will be disclosed when they’re confirmed, Samsung said.

Insurers and energy companies were among this week’s best performers in Hong Kong. China Pacific Insurance Group Co. climbed 13 percent, the biggest gainer among the H share gauge’s 40 constituents, while Ping An Insurance Group Co. advanced 10 percent. China Shenhua Energy Co. led coal and oil companies higher, with an increase of 11 percent.

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