Photographer: Qilai Shen/Bloomberg

Shanghai Shares Rise as China Markets Reopen; Banks Pare Gains

  • Chinese shares offshore rallied most since mid-July last week
  • PBOC’s targeted reserve cut fueled bets of monetary easing

Chinese stocks rose, led by consumer shares, as the nation’s financial markets reopened after a week-long break. Banks trimmed early gains.

The Shanghai Composite Index gained 0.7 percent to 3,374.38 at the close. Suning Commerce Group Co. paced gains by retailer shares. Industrial & Commercial Bank of China Ltd. rose 1.7 percent after the central bank said it will reduce the amount of cash that lenders must hold as reserves from next year. Today’s move was subdued compared with last week’s rally by China’s overseas-traded shares, when the MSCI China Index jumped 4.3 percent.

The Shanghai gauge has lagged behind gains by offshore shares this year amid a deleveraging campaign and as mainland investors flocked to Hong Kong stocks. Investors see little upside for the rest of the year as officials clamp down on volatility around this month’s Communist Party congress, according to a Bloomberg poll.

The PBOC said Sept. 30 that it would reduce the amount of cash that banks must hold as reserves from next year, with the size of the cut linked to the flow of funding to parts of the economy where credit has traditionally been scarce. Reductions will range from 0.5 percentage point to 1.5 percentage point depending on how much business banks do with small firms, agricultural borrowers and new companies.

Historically, mainland markets have climbed after similar holiday rallies in Hong Kong. The Shanghai Composite Index advanced 1.5 percent on the first day back after Golden Week in 2016, and rose 3 percent the year before. October is also typically the best month for returns: the benchmark gauge has risen an average 4.4 percent in that month this decade.

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