China Stocks at Nine-Month High as Inflows Seen on Housing Curbs

Updated on
  • Crackdown on real estate prices may help equities: Shanshan
  • Steel companies gain as Baoshan reports swing to profits

China’s stocks extended gains at a nine-month high on optimism the government will boost spending on infrastructure and that efforts to curb property price gains will send money back into equities.

The Shanghai Composite Index advanced 0.1 percent at the close on Tuesday, surging in the final minutes of trading. Baoshan Iron & Steel Co. rose 2.2 percent after reporting its best quarterly performance since 2012. China Communications Construction Co., a transportation infrastructure group, slipped 4.3 percent in its first decline in nine trading sessions. The Hang Seng Index lost 0.2 percent. 

China’s gross domestic product has increased at a 6.7 percent clip for three straight quarters, spurring optimism the economy has stabilized. State-owned companies have advanced on bets the government will speed up a structural overhaul and boost spending on large public projects. Chinese authorities in at least 21 cities have introduced home-buying curbs, ranging from raising down-payment requirements to purchase bans. The value of China’s new home sales rose 61 percent in September from a year earlier.

"The market is staging a consolidation after the recent decent gain and some of the leading gainers such as infrastructure names are seeing profit taking,” said Wu Kan, a fund manager at Shanshan Finance Co. in Shanghai. "The market may continue to go up after the consolidation. The crackdown on the property market is actually potential good news for the stock market."

The Shanghai Composite closed at 3,131.94. The CSI 300 Index was little changed, while the Hang Seng China Enterprises Index fell 0.2 percent.

Sentiment on Chinese assets has been tempered by accelerated declines in the yuan, with the offshore rate dropping to unprecedented levels and the price on the mainland sliding to a six-year low. Stock investors will accept a gradual depreciation of the yuan, said Wu, adding that the nation’s efforts to control a rise in property prices may increase the flow of funds to equities.

The Shanghai Composite still needs to rise above an intraday high of 3,140.44 set on Aug. 16 to break out of a range-bound pattern that it has been stuck in for two months.

Steelmakers Climb

Baoshan Steel rose to its highest level since Oct. 11. The steelmaker posted third-quarter net income of 2.13 billion yuan ($315 million), compared with a loss of about 920 million yuan a year ago. It said it expects a 600 to 800 percent surge in 2016 net profit. Hesteel Co. added 1 percent, while Angang Steel Co. gained 1.5 percent.

China Coal Energy Co. advanced 7 percent and Shaanxi Coal Industry Co. jumped 9.3 percent, both reaching one-year highs. China’s government has finished more than four-fifths of the tasks it set for itself on cutting overcapacity in the steel and coal sectors, Xu Kunlin, an official with the National Development and Reform Commission, said at a briefing.

China Railway Group Ltd. and Power Construction Corp. of China dropped at least 1.5 percent. The two stocks have gained this month on expectations the government will step up infrastructure building to bolster growth. China will invest more than 1 trillion yuan in urban rail projects by 2020, the state-run Economic Information Daily reported, citing calculations it performed by adding up figures of previously approved projects.

Belle International Holdings Ltd. tumbled 9.1 percent in Hong Kong, its biggest slide since March 2014. The retailer of women’s footwear reported first-half net income of 1.73 billion yuan, down from 2.16 billion yuan a year ago.