Chinese Stocks Extend Monthly Gain as Funds Switch From Property

  • Shanghai gauge rises to take November advance to 5.9 percent
  • Latest real estate curbs may push funds into A shares: KGI

Chinese stocks headed for their biggest monthly gain since March amid speculation curbs on the real estate market will push funds into equities. A measure of Hong Kong-traded mainland shares slid for its first retreat in eight sessions.

The Shanghai Composite Index climbed 0.2 percent at Tuesday’s close, with Citic Heavy Industries Co. and CRRC Corp. pacing the advance. The measure has added 5.9 percent so far this month. The CSI 300 Index rose to its highest close of the year amid volume that was 89 percent greater than its 30-day average, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index slipped 0.3 percent as insurers that led last week’s rally retreated. The Shenzhen Composite Index fell the most in a month.

China’s central bank is clamping down further on mortgage lending in areas deemed overheated, people with knowledge of the matter said, and some lenders have been asked to suspend distributing new home loans. The city of Shanghai said in a social media post on Monday that it will tighten mortgage loan policies starting Nov. 29, while Tianjin has raised minimum mortgage down payments for first homes to at least 30 percent.

"The government is tightening property so maybe some of that excess liquidity is flowing into the A-share market again," said Ben Kwong, a Hong Kong-based director at KGI Asia Ltd. "Turnover is improving."

Shanghai’s benchmark index rose to 3,282.92, while the CSI 300 measure of mainland A-shares added 0.8 percent. The H-share gauge of Chinese stocks traded in Hong Kong slipped to 9,846.21, while the Hang Seng Index lost 0.4 percent.

Investors in China are buying shares in home appliance, liquor and traditional Chinese medicine firms ahead of the start of a trading link between Hong Kong and Shenzhen on Dec. 5, Central China Securities Holdings strategist Zhang Gang said in an interview. Those sectors could attract foreign investors because of their high dividend payouts or lack of access to similar companies in Hong Kong, Zhang said.

Midea Group Co. jumped 4.5 percent to close at a record price, and the liquor companies Wuliangye Yibin Co. and Luzhou Laojiao Co. rose 3.5 percent and 3.2 percent, respectively. Dong-E-E-Jiao Co., a maker and seller of traditional Chinese medicine, climbed 1.9 percent.

Even as some of the Shenzhen-traded companies rallied, the southern city’s benchmark dropped 0.8 percent. The measure remains relatively expensive, trading at 25 times estimated earnings compared with just 8.2 times for the H-share gauge and 14 times for the Shanghai measure, according to data compiled by Bloomberg.

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