China H Shares Rise Most in Three Weeks on Factory Data Surprise

  • Premium of Shanghai-Hong Kong stocks narrows most in a month
  • ChiNext extends last week’s losses on WMP regulation concerns

Chinese stocks listed in Hong Kong rallied the most in three weeks after a private manufacturing index unexpectedly jumped to the highest level since February last year.

The Hang Seng China Enterprises Index closed up 1.9 percent, its biggest advance since July 11, with China Longyuan Power Group Corp. and a pair of automakers leading gains. Shares traded on the mainland extended last week’s decline, with the ChiNext index of smaller companies retreating 1.1 percent on continuing concern over the impact of plans to crack down on wealth-management products.

A factory gauge from Caixin Media and Markit Economics jumped to 50.6 in July from 48.6 a month earlier, data showed on Monday, while an official measure dropped to 49.9. The ChiNext measure retreated last week amid reports regulators are planning to limit WMP investments in equities.

"If Caixin’s data are so strong, it means that the real economy is improving," said Steven Leung, executive director at UOB Kay Hian (Hong Kong) Ltd.

The Hang Seng China Enterprises Index rose to 9,129.20, while the Shanghai Composite Index retreated 0.9 percent to 2,953.39. Hong Kong-traded Chinese stocks have been outperforming their Shanghai peers in recent weeks, narrowing the price difference to a 10-month low. The Hang Seng China AH Premium index, which measures the gap, sank 1.7 percent on Monday, the most in a month.

WMP Curbs

The China Banking Regulatory Commission is drafting rules governing WMPs to prevent risks in the sector, the official Xinhua News Agency reported last week, citing the regulator. The CBRC is said to be planning a crackdown on the $3.5 trillion WMP market, with initial draft rules forbidding cash from “mass market” products to be invested in locally listed shares, a person with direct knowledge of the matter said last week.

China Longyuan, which designs and runs wind farms, jumped 5.5 percent to lead the H share index. Great Wall Motor Co., a manufacturer of pickups and sport-utility vehicles, advanced 4.7 percent, and vehicle and parts maker Dongfeng Motor Group Co. rose 3.9 percent. China International Capital Corp. analysts led by Feng Wei wrote in a note that the country’s auto stocks could climb by 20 percent by September as a sales recovery continues.

China is considering an overhaul of its steel industry that would consolidate major producers into two giants, one in the north of the country and the other in the south, people familiar with the plan said. Angang Steel Co. gained 3.7 percent in Hong Kong after slipping for two straight days.

Hong Kong’s Hang Seng Index closed 1.1 percent higher as the city braced for the strongest typhoon this year. The Hong Kong Observatory said it will consider issuing Storm Signal No. 8, its third-highest typhoon warning, between 6 p.m. and 10 p.m. on Monday. Under trading rules, Hong Kong Exchanges & Clearing Ltd. will cancel premarket trading if that signal is in force between 7 a.m. and 9 a.m. No morning session will be held if the warning is in effect at 9 a.m. and trading will be canceled for the day if it’s still in force at noon.

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