China H Shares Climb to Seven-Week High as Railway Stocks Gain

  • Rail companies advance as plan for Beijing lines is approved
  • Small-caps rise after Shenzhen connect gets Dec. 5 start date

Chinese stocks in Hong Kong rose to a seven-week high as railroad companies advanced after China approved a $36 billion rail plan for cities around Beijing. A measure of small-cap companies in the city rose as regulators announced the start date for a trading program between Hong Kong and Shenzhen.

The Hang Seng China Enterprises Index climbed 0.9 percent at the close. CRRC Corp. and Zhuzhou CRRC Times Electric Co. were among companies leading gains on the measure after China’s top economic planner approved a plan to link Beijing to neighboring cities as part of a government effort to improve connectivity around the nation’s capital. China Railway Group Ltd. also advanced in Shanghai. Huayi Tencent Entertainment Co. surged 14 percent, leading a measure of Hong Kong-traded small cap stocks higher.

“The railway construction sector will surely benefit from this government action," said Sandy Mehta, chief executive officer of Value Investment Principals Ltd. “The construction stocks look attractive, and the recent uptick in commodity prices will help those doing business abroad. All this infrastructure will help the entire sector."

The Shanghai Composite Index is headed for a 9.1 percent gain this quarter, the steepest such rally this year, as industrial and materials companies surged amid optimism that China’s authorities will lift fiscal spending to stimulate growth. While the H-share gauge has underperformed mainland shares during this period, a rally by insurers and brokers helped the measure erase its quarterly loss. Insurers rallied last week amid bets that their investment returns will improve along with surging mainland markets.

The Hang Seng China Enterprises Index rose to 9,875.54, while the Shanghai Composite Index climbed to 3,277. Data released on Sunday showed China’s industrial profits rose 9.8 percent in October from a year earlier to 616.1 billion yuan ($89 billion), faster than the 7.7 percent increase in September.

Linking Up

The Hang Seng Composite Small Cap Index gained 1.8 percent. Mainland investors will be able to trade some smaller companies listed in Hong Kong from Dec. 5, when the link between Shenzhen and the city starts.

The second equity trading link between the mainland and the city will expand the number of Hong Kong-traded companies that mainland investors can access, while opening up Shenzhen, where many Chinese technology companies are listed, to foreign investors. Hong Kong’s Hang Seng Index gained 0.5 percent, while the Shenzhen Composite Index fell 0.1 percent.

CRRC jumped 4.8 percent. The company said its unit is planning an offshore acquisition, and that a separate unit signed a train contract with the Australian government. A rail plan announced by the National Development and Reform Commission on Monday calls for nine lines connecting Beijing to the nearby port city of Tianjin, cities in Hebei province and to a new airport in the capital. Zhuzhou CRRC Times jumped 3.4 percent, while China Railway Group Ltd. gained 4 percent in Shanghai.

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