China Stock Turmoil 2015

Chinese and Hong Kong stocks higher amid stimulus hopes

Mainland stocks clocked their best performance in four weeks amid expectations for more stimulus as Beijing readies for a major political gathering

PUBLISHED : Thursday, 15 October, 2015, 6:37pm
UPDATED : Friday, 16 October, 2015, 8:06pm

Hong Kong and mainland shares closed the week on upbeat note Friday, with investors’ mood shifting into high gear amid expectations that Beijing will unveil fresh stimulus measures to pump up the economy as the countdown continues to a key political gathering later this month.

The Hang Seng Index added 0.8 per cent or 173.65 points, to 23,061.82, rebounding after two days of losses. The mainland-China tracking H-share index rose 1 per cent, or 105.22 points to 10,658.15.

The Shanghai Composite Index rose 1.6 per cent, or 53.28 points to close at 3,391.35, up 6.5 per for the week, its best weekly advance in more than four months. The Shenzhen Composite Index went up 1.3 per cent to 1,966.96. The large-company tracking CSI300 gained 1.4 per cent, or 47.25 points, to 3,534.07. The Nasdaq-style ChiNext rose 1.9 per cent to close at 2,449.03.

Turnover in Shanghai and Shenzhen surpassed 1.14 trillion yuan (HK$1.39 trillion), recovering from the week before the national holidays, when daily turnover tumbled to 300 billion yuan to 400 billion yuan.

“Investors are pricing in the 5th party plenum due later this month. The rebound is likely to continue next week, but may lack steam,” said Adam Xu, a mutual fund manager based in Shanghai, noting some profit taking may also weigh on the market next week.

Wang Zhen, an analyst with Merchant’s Securities, said in a note that investors were pricing in the likelihood of fresh stimulus measures, with only a handful of trading days left before a high-level political meeting kicks off in Beijing.

“There is limited room for further upward growth for the major indexes,” he said.

Hopes are high for more official measures to boost the country’s economy during Communist Party’s plenum, set for October 26 to 29, which will map out the nation’s 13th five-year plan. The meeting comes as economic growth slows and speculation mounts over whether party elites will unveil new measures to boost growth or downgrade the official gross domestic product target, currently set at 7 per cent.

In Hong Kong, AIA Group, the second most heavily traded stock, jumped 3.4 per cent to HK$46.2. The insurer reported an 18 per cent year-on-year jump in its new-business value for the third quarter, bolstered by sales increases in both Hong Kong and China. Deutsche Bank raised its target price from HK$52.3 to HK$56.5 in a note yesterday and reiterated its recommendation for investors to buy the stock.

Tech giant Tencent, the most heavily traded stock, advanced 1.1 per cent to HK$146.60.

Brokerage firms advanced broadly, after the Shanghai stock exchange said its balance of margin debt exceeded 600 billion yuan in the past month by Thursday, as investors increased their positions built with borrowed money. Total margin lending expanded for six trading days in a row in both Shanghai and Shenzhen bourses, reaching 966.09 billion yuan by Thursday.

Shenzhen-listed Guoyuan Securities shot up by 8.14 per cent to 21 yuan.

“Chinese markets have gradually stabilised, as the brokerage sector showed improving operating results this month,” said Cao Jiacong, an analyst from China Galaxy International Securities.

He expected the sector to record further gains as overall market sentiment turned positive.

Companies engaged in infrastructure construction business, and airlines were also among the top gainers on the mainland markets.

Shanghai DaZhong Public Utilities surged 4.9 per cent to 8.74 yuan. Air China added 5.9 per cent to 8.8 yuan.

Gerry Alfonso, a director with Shenwan Hongyuan Securities in Shanghai said the market this week had experienced a very solid performance as well as an improvement in trading volumes compared to the pre-holiday period.

Mainland based cosplay designer China Partytime closed at HK$0.93 at its debut, down 7 cents or 7 per cent against the listing price of $1.