Bargain hunters push Chinese stocks up, fundamentals remain unchanged
Airlines top gainers in Shanghai
Potential state sector reforms helped excite mainland investors on Thursday with a rumoured merger lifting Chinese stocks into positive territory after a steep decline on Wednesday, while in Hong Kong disappointing telecommunications results weighed on market sentiment.
The Shanghai Composite Index climbed 1.45 per cent to 3,368.739 points after media reports of a possible merger between state-owned airlines Air China and China Southern Airlines.
Shares in the two companies soared the daily maximum of 10 per cent to 9.46 yuan (HK$11.53) and 8.97 yuan respectively. Their Hong Kong shares also rose sharply. Both firms later released Hong Kong stock exchange announcements saying they had no information to disclose.
The Shenzhen Composite Index gained 3.71 per cent to 1,959.19 while the small cap tracking ChiNext index, which took a 6.6 per cent beating the day before, recovered 4.84 per cent to finish at 2,458.14.
Chinese bank stocks retreated with Industrial and Commercial Bank of China dropping 2.52 per cent to 4.65 yuan and Bank of China slipping 1.99 per cent to 3.95 yuan.
The macro picture has not changed and China's markets rebounded on bargain hunting, said Ivan Li, equity analyst at Tung Shing Securities.
The potential merger renewed investors interest in the state sector and gave support to government talk of further sector reform, analysts said. Pharmaceutical companies also rallied on expectations the industry is in line for some benefits at the upcoming plenum in Beijing.
In Hong Kong, weak fourth-quarter guidance and falling average user revenue at China Mobile sent the company's shares down 3.03 per cent to HK$92.80, while rival China Unicom fell 2.73 per cent to HK$9.98.
The two stocks weighed on the broader Hang Seng Index, which fell 0.63 per cent to 22,845.37 points. The mainland large cap tracking H-share Index lost 0.46 per cent to close at 10,600.52 points.
Jason Song, a strategist with Guotai Junan International, said the stock recovery momentum in China and in Hong Kong, which had supported major indices in the past several weeks was "generally tapering".
"People had been chasing the pickup in Shenzhen and in turn pushed up the market in the last few weeks. But it seems the wave of speculation is coming to an end," he said.
The biggest gainer in Hong Kong, shares in retailer Wumart, soared 68.20 per cent to HK$5.50 on the news the firm would be taken private at a hefty premium to recent share price levels.
Additional Reporting by Ben Westcott