China's Large Caps Surge to 2015 High Amid MSCI, Handover Boost

  • SSE 50 Index outperforms Shanghai gauge by the most in 2 years
  • MSCI’s global benchmark index picks lead gains on the mainland

China’s large-cap shares extended their outperformance amid investor optimism about MSCI Inc. inclusion and speculation state-backed funds were keeping markets buoyant before President Xi Jinping’s trip to Hong Kong this week.

The SSE 50 Index of some of the nation’s biggest companies climbed 0.6 percent to 2,543.32, closing at the highest since August 2015. Gains were led by Guotai Junan Securities Co. and China Fortune Land Development Co., which are among the 222 mainland-traded shares that will enter MSCI’s global benchmark indexes. In Hong Kong, the Hang Seng Index rose 0.8 percent, snapping a four-day losing streak.

The SSE 50 Index is outperforming the broader Shanghai Composite Index by the most in two years as a regulatory campaign to curb leverage drives up funding costs for smaller, privately run firms. China has a history of influencing domestic markets during important political events, and was said to have made preparations to support the Hong Kong stock market if needed to create a positive atmosphere before July 1, when Xi will visit the city to mark 20 years of Chinese rule.

"The usual big cap stocks in the mainland are all being supported," said Andrew Clarke, director of trading at Mirabaud Asia Ltd. in Hong Kong. "It’s an easy way to support the indices ahead of the 20th handover anniversary. You can’t have the mainland market down with Hong Kong being up."

  • Guotai Junan rose 3.1%, while China Fortune Land advanced 2.8%. Seven of the top 10 gainers on the CSI 300 Index are among MSCI’s index picks.
  • The Shenzhen shares of China Vanke Co. jumped by the daily 10 percent trading limit, taking its six-day rally to 26 percent.
  • Consumer staples and information technology companies led gains on the CSI 300 Index. Iflytek Co. advanced 8.2%, while Wuliangye Yibin Co. climbed 3.2% to a record high.
  • Volume on the CSI 300 Index was 44% more than its 30-day intraday average, while that of the Hang Seng Index was 28% less, according to data compiled by Bloomberg.
  • Sany Heavy Industry Co. advanced 7.1% in Shanghai to the highest since August 2015. Investors are betting on a boost in demand from China’s high-speed rail construction after the announcement of a new bullet train model, said Morningstar Investment Service analyst John Hu.
  • The Shanghai Composite Index closed above its 100-day moving average for the first time since April.
  • In Hong Kong, BOC Hong Kong (Holdings) Ltd. led gains on the city’s benchmark, rising 6.4% to a record close. Morgan Stanley boosted its 12-month price target 21%, citing prospects of higher earnings.
  • Brilliance China Automotive Holdings Ltd. dropped as much as 4.6% before paring losses to close down 0.7%. Sanford C. Bernstein analyst Robin Zhu said its unit’s 1 yuan investment in a loss-making subsidiary is a “tragic waste.”

— With assistance by Kana Nishizawa, Robin Ganguly, and Philip Glamann

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