China shares higher on economic reform hopes
Hong Kong and Shanghai stock indexes slightly lower at the afternoon break
Mainland and Hong Kong stocks recovered from a mid-session dip to close the day higher with strong gains for industrial firms after China’s top leaders outlined a slew of measures to pump prime the economy next year.
Restrictions on buying homes would be lifted allowing rural residents to buy properties in cities were among the ideas announced late Monday, sending shares in cement makers, resource companies and infrastructure surging during the day.
The proposed measures are “actually quite positive” and will help support the housing sector and the construction material suppliers, said Deloitte China chief economist Xu Sitao. It may well give the sector’s listed companies a short-term stock boost but over the long term, there is still “huge consolidation pressure,” Xu said, as many material suppliers grapple with a legacy of overcapacity and tiny margins.
Among the bigger Chinese movers by index weighting, cement maker Anhui Conch rose 2.86 per cent to 17.96 yuan and chemicals manufacturer Zhejiang Juhua rose 5.81 per cent to 23.13 yuan. The broader Shanghai Composite index rose 0.26 per cent to 2,651.77 touching a new four-month high, and the Shenzhen Composite index added 0.92 percentage points to rise to 2,379.63.
Resources firms China Northern Rare Earth rose 3.51 per cent to 15.05 yuan while Jiangxi Copper gained 1.48 per cent to 17.10 yuan. Property stocks, however, were broadly flat for the session, with the central government saying it may ask developers to cut prices to help boost flagging sales.
In Hong Kong, the Hang Seng Index nudged 0.18 per cent higher to 21,830.02 while the Hang Seng China Enterprises Index was off 0.18 per cent to 9,731.53. Total market turnover was an insipid HK$48.7 billion, compared to Monday’s HK$60 billion.
“Markets are quiet as investors prepare for the Christmas holiday,” said Wang Chong, an analyst for Victory Securities in Hong Kong. He said he expected trading volume to remain light approaching the year-end.
Chinese banks pulled back broadly after strong gains in the prior session, triggered by the People’s Bank of China’s decision to add liquidity to the banking system through a special lending facility. In Shanghai, China Minsheng Banking tumbled 3.91 per cent to 9.58 yuan, China Citic Bank lost 1.32 per cent to 7.50 yuan, and Bank of China shed 0.73 per cent to 4.09 yuan. In Hong Kong, China Citic Bank fell 0.80 per cent to HK$4.99.
The newly appointed board of Hong Kong-listed China Shanshui Cement issued a circular saying the “takeover process” of the firm’s Shandong subsidiaries “progressed smoothly” with the aid of local Jinan government officials.
The company’s founder and former chairman, ousted recently in a shareholder revolt, still holds the Shandong subsidiaries chops – corporate seals vital for signing any company documents – and appears to have operational control over some of the firm’s cement plants.
Shares in Shanshui were suspended earlier this year after the public float fell below the 25 per cent required by listing rules.
In the currency market, the yuan continued to strengthen as the People’s Bank of China set the reference rate at 6.4746 per US dollar, compared with 6.4753 the previous day. The onshore rate closed 0.03 per cent firmer at 6.4785, while the offshore yuan traded 0.23 per cent stronger in late trading at 6.5378.