China’s Stocks Rise as Rail Companies, Liquor Makers Lead Gains

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  • Railway stocks up as China plans 800 billion yuan investment
  • Oil producers take hit after crude futures slump overnight

CIBC's Stretch: China Mindful of 'Torrent of Outflows'

Chinese shares climbed to a three-week high, led by an advance in rail companies and liquor makers.

The Shanghai Composite Index added 0.7 percent to 3,158.79 at the close. China Railway Group Ltd. and Guangshen Railway Co. rallied more than 2 percent after Xinhua News Agency said China will invest about 800 billion yuan ($115 billion) in railways this year, the same amount as in 2016. Kweichow Moutai Co. climbed to a record ahead of the Lunar New Year peak consumption period. The Hang Seng China Enterprises Index fell 0.2 percent as energy producers lagged.

China has boosted spending on bridges, roads and railways as the government seeks to keep the world’s second-largest economy growing around 6.7 percent, helping a gauge of industrial stocks rally almost 10 percent in the fourth quarter. Policy makers have vowed to speed up reforms in state-owned enterprises to improve profitability. China Railway Corp. will start mixed-ownership reforms this year, Shanghai Securities News reported on Tuesday, citing General Manager Lu Dongfu.

"The China and Hong Kong markets will remain in range-bound trading before Chinese New Year," said Ben Kwong, executive director at KGI Asia Ltd. in Hong Kong. "On one hand, the liquidity situation will remain tight as an interest-rate or reserve-ratio cut seems unlikely thanks to a weakening yuan. On the other hand, some stocks may benefit from specific fiscal boosts or reform initiatives, such as the railway sector."

The Hang Seng Index was little changed at 22,134.47 with PetroChina Co. and China Petroleum & Chemical Corp. among leading decliners after crude slumped in New York on Tuesday. China Shenhua Energy Co., the Hang Seng Index’s biggest gainer, rallied 3.3 percent after UBS AG analysts led by Benson Chen raised the stock’s rating.

The ChiNext Index, a measure of small-company shares in Shenzhen, closed up 1.4 percent, the most since October. The gauge tumbled by 28 percent last year, compared with a 12 percent decline in the Shanghai benchmark index.

"Some mutual funds switched some of their holdings to blue chips from ChiNext shares at year-end as they compiled quarterly reports for their clients, and now the ’window dressing’ pressure is gone," said Zhang Gang, an analyst at Central China Securities Holdings in Shanghai. "The gauge was a bit oversold earlier and some investors are bargain-hunting high-growth stocks before the earnings season."

  • The consumer staples sector was the biggest gainer in the CSI 300 Index, adding 2.7% as the Westpac-MNI China Consumer Sentiment Indicator showed confidence in the economy improved in December from a month earlier
    • Kweichow Moutai rose 5.2%, while Wuliangye Yibin added 3.6%
  • Lenovo, the third-biggest gainer in the Hang Seng Index, advanced 2.3% to reach a two-month high
  • Sunny Optical Technology surged 7.5% in Hong Kong after Morgan Stanley boosted its rating on the stock to overweight from underweight
  • Henry Group Holdings surged 36.2%, the most since 2012, after a Hong Kong stock exchange filing showed shareholders with more than a 70% stake may sell shares, which may trigger a general offer for the company
  • Investors sold a combined 1.35 billion yuan of mainland shares via northbound trading of the Shanghai stock connect, the most in two weeks, Bloomberg data show
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