China Stock Turmoil 2015

Xi’s remarks, misleading PBOC comments spark buying frenzy in Chinese stocks

PUBLISHED : Wednesday, 04 November, 2015, 9:11am
UPDATED : Wednesday, 04 November, 2015, 8:20pm

A buying frenzy sent Chinese stocks surging the most in three months on Wednesday, sparked by a spate of positive news, including remarks by President Xi Jinping on China’s growth, better-than-expected economic data, upcoming historic meeting between Xi and the Taiwanese leader, and misleading comments from the People’s Bank of China (PBOC) triggering hopes for an immediate launch of the Hong Kong-Shenzhen stock connect scheme.

Shanghai Composite Index soared 4.3 per cent to end the day at 3,459.64, notching up its biggest daily gain since early August. The benchmark hit its highest closing level in more than two months on Wednesday. The large-cap CSI300 spiked 4.7 per cent to 3,628.54. Shenzhen stocks also leapt, with the Shenzhen Composite Index up 5.1 per cent to 2,089.29 and the Nasdaq-style ChiNext Index higher by 6.4 per cent to 2,584.32.

Hong Kong’s Hang Seng Index climbed 2.2 per cent to finish at 23,053.57, with the Hang Seng China Enterprises up 2.7 per cent at 10,560.74.

Turnover almost doubled in Hong Kong, hitting HK$112 billion, compared with around HK$65 billion on Tuesday. It also increased sharply in Shanghai, up to 426 billion yuan, from Tuesday’s 246 billion yuan.

The rally came after Xi said China’s annual economic growth will not fall below 6.5 per cent in the next five years, according to state media reports.

Markets also received a boost from better-than-expected Caixin/Markit services Purchasing Managers’ Index, which hit a three-month high of 52 in October, indicating the economy has started to show signs of stabilising.

Brokerage firms and stock exchange surged across the board after the PBOC on Wednesday published a lengthy article by governor Zhou Xiaochuan saying the long-awaited link-up between Hong Kong and Shenzhen stock exchanges would start before the end of the year.

However, the PBOC added a line on top of the article around noon, stating it was actually an extract from an internal speech by Zhou on May 27. The Hong Kong Exchanges & Clearing also issued a statement saying the proposal to link Hong Kong and Shenzhen exchanges is still pending regulatory approval.

Hong Kong-based VC Brokerage director Louis Tse said brokers were surprised by the first PBOC announcement as there are less than two months to go for the year to end.

“How can you implement it in time,” Tse said. The clarification was possibly added because the PBOC wanted “to clear the air as they could have misled the market”, Tse said.

As the most heavily traded stock of the day in Hong Kong, Hong Kong Exchanges & Clearing pushed up 4.7 per cent to HK$209.2, with HK$6.4 billion changing hands.

Citic Securities, China’s largest securities firm, jumped 9.2 per cent to HK$18.22 in Hong Kong. Smaller rival Haitong Securities zoomed 8.6 per cent higher to HK$14.12. In Shanghai, both stocks were suspended from trading during the day after their price gains exceeded the 10 per cent limit.

Shares of companies based in the southwestern Fujian province posted significant gains on the mainland, after state media from both sides reported President Xi Jinping and Taiwan’s Ma Ying-jeou would hold a meeting in Singapore on Saturday, the first of its kind since the end of China’s civil war in 1949.

Xiamen ITG saw its Shanghai-listed shares surge by the 10 per cent upside limit. Xiamen International Airport and Fujian Cement also jumped 10 per cent.