CHINA MARKETS
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Stocks

Shanghai shares ring up biggest daily gain in a month as investors reposition; Hong Kong stocks up

Property and brokerage companies lead charge in equities

PUBLISHED : Wednesday, 02 December, 2015, 9:23am
UPDATED : Wednesday, 02 December, 2015, 6:56pm

Chinese stocks posted their biggest daily rise in almost a month on Wednesday as investors reposition themselves in anticipation of improved corporate earnings and fundamentals in 2016, while digesting the IMF’s decision to include the yuan into an elite reserve basket.

Hong Kong’s key Hang Seng Index gained 0.44 per cent or 98.34 points to settle at 22,479.69. The H-share Index rose 1.03 per cent, or 102.42 points to 10,050.36, as investors piled in partly on the expectation of more stimulus and easing from the Europe.

The benchmark Shanghai Composite Index was pulled up by 2.33 per cent, or 80.60 points, to close at 3,536.91, the biggest daily rise since November 4. Turnover was at 369.2 billion yuan, slightly up from 332.6 billion yuan on Tuesday.

The CIS300 Index advanced by 3.63 per cent, or 130.26 points, to 3,721.96.

The property sector gave a strong performance for a third day in a row, as investors betting the central government will push out more supportive policies in the annual Central Economic Work Conference getting underway the middle of this month.

Adam Xu, a mutual fund manager based in Shanghai, said “both sentiments and expectations are recovering”, as investors are finding some companies, particularly in the property sector, were doing better than people imagined during the market rout this past June.

Ben Kwong Man-bun, executive director and head of research of KGI Asia, said Hong Kong stocks are bouncing back on the expectation that Europe and China may introduce more monetary stimulus shortly.

“There are also expectations that China will cut its interest rate further to boost the weak economy. The market also expects China to relax more property rules to boost sales. These have boosted both Hong Kong and mainland stocks,” he said.

Kwong, however, believes the stock market rebound will not be significant.

“There is no evidence to show the mainland economy will be growing faster anytime soon. The news on Tuesday that the International Monetary Fund is adding the yuan to the reserve currency basket would be positive but this will only become effective next October.”

China Vanke for a second day hit the daily limit up in Shenzhen and closed 10.01 per cent higher at 18.24 yuan. Its H-share added 2.66 per cent to HK$ 21.25.

Henan Lianhua Gourmet Powder, a company focused on cooking seasoning, beat the daily limit up by 9.99 per cent to 8.59 yuan, after it announced on Tuesday night to pick Xi Yinping, a cousin of president Xi Jinping, as a candidate for independent director.

The company filed an announcement after the market closing that they cancelled the nomination of Xi, without stating a reason.

Brokerage companies rebounded in both the mainland and Hong Kong on Wednesday, pulling up the indexes in the process.

Gerry Alfonso, a director with Shenyin Wanguo Securities in Shanghai, said: “Financial stocks have been under pressure in recent days impacted by some investigations and regulatory scrutiny. These developments seem to have been already absorbed by the market and the new round of IPOs, which is clearly positive for brokers, is helping give additional support for the financial sector.”

Citic Securities, the brokerage which is under investigation by the mainland authorities, rose 5.91 per cent to 18.82 yuan in Shanghai, and added 2.87 per cent to HK$18.62 in Hong Kong.

The technology sector dragged the Shenzhen market lower, as investors cashed out gains made in the past few days.

The Shenzhen Composite Index lost 0.41 per cent, or 8.97 points to 2,189.31. The Nasdaq-style ChiNext Index dropped 1.58 per cent, or 42.08 points to板2,613.26.

The yuan was still hovering at a three-month low. The onshore yuan closed at 6.3987, slightly weaker from Tuesday’s close at 6.3985. The offshore yuan was trading at 6.4405 at 4:40 pm.