Chinese Stocks Rise to 2015 High as Large Caps Extend Advance

  • Materials companies lead gains among mainland companies
  • Chinese brokerages jump on expectation earnings will improve

Chinese equities traded offshore and on the mainland closed at the highest levels since 2015, with financial shares leading gains in Hong Kong and materials companies driving large caps higher onshore.

The Hang Seng China Enterprises Index rose 1 percent in Hong Kong as Huatai Securities Co. and GF Securities Co. led financial companies higher. China Shenhua Energy Co. jumped the most since March as supplies tightened amid peak summer demand. The CSI 300 Index of mainland-traded large-cap stocks gained 1.7 percent at the close, as investors switched out of smaller companies into commodity producers.

Offshore-traded Chinese companies have outperformed mainland shares this year by a wide margin, as funds flowed into Hong Kong through mainland stock links, while global investors piled into technology companies as markets rose to multi-year highs. Meanwhile, mainland shares have been dragged down by concerns over China’s deleveraging campaign and the health of smaller, non-state firms. The Shanghai Composite Index is up just 4.1 percent this year, compared with a 16 percent advance for the H-share measure. Mainland large caps have fared better, with the CSI 300 Index climbing 13 percent this year.

“Sentiment has been good for mainland large caps,” said Daniel So, a strategist with CMB International Securities Ltd. in Hong Kong. “Earnings prospects for the cyclical sector is quite good.”

The Shanghai Composite Index rose 1.4 percent at the close, with its 10-day volatility soaring to the highest level since December 2016. The ChiNext gauge climbed 1 percent, the most since June 15. Volume on the CSI 300 Index was 79 percent more than its 30-day average, according to data compiled by Bloomberg.

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  • China’s mining sector rallied after Reuters reported the nation is considering a merger of two of its biggest state-run metals companies, China Minmetals Corp. and China National Gold Group Corp. Minmetals Development Co., which is 63% owned by China Minmetals according to latest Bloomberg data, soared by the 10% daily limit
  • A measure of materials companies rose the most on the CSI 300 Index, with Aluminum Corp. of China and Jiangxi Copper Co. gaining at least 5.3%. Investors are deserting small caps to buy firms that may post solid earnings growth, according to Ken Chen, a Shanghai-based analyst with KGI Securities.
  • Chinese steelmakers gained as investors expect supply-side reforms aim to cut more capacity and boost profit margin near fourth quarter, according to Kevin Lin, an analyst at Fubon Financial Holding. Daye Special Steel Co. gained 3.3%.
  • Huatai Securities gained 3.9% in Hong Kong and GF Securities rose 2.5% as Chinese brokerages climbed amid speculation favorable government policies would boost earnings. Shanxi Securities Co. and Guosen Securities Co. each climbed by their daily limit of 10% in mainland trading.
  • China solar firms advanced after the National Energy Administration said at a conference Wednesday that it added about 24 gigawatts of new solar capacity in the first half of the year. LONGi Green Energy Technology Co. climbed 6.4% to the highest close in more than two years.
  • China Evergrande Group rose 1.5%, reversing a drop of 2.3%. Chinese Estates Holdings Ltd. said it has acquired about 5% of the company for HK$8.1 billion ($1 billion) since April. Chinese Estates gained 2.7%.
  • China Coal Energy Co. jumped 5% in Hong Kong, while China Shenhua Energy Co. advanced 4.1%, the most on the Hang Seng China Enterprises Index. Coal consumption at major power plants accelerated in July with six of the largest coal-fired power plants holding less than 15 days worth of fuel supplies, according to Zhao Dongchen, an analyst at ICBC International Research Ltd.
  • Future Land Development Holdings Ltd. surged 13 percent after unveiling a $656 million take-private offer in Hong Kong.
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