Shanghai shares rally for second day after Lunar holiday

Shanghai benchmark leaps 3.3 per cent to end at three-week high

PUBLISHED : Tuesday, 16 February, 2016, 12:04pm
UPDATED : Tuesday, 16 February, 2016, 5:50pm

Investors breathed a sigh of relief on Tuesday as mainland markets surged to a three-week high, as a stronger oil price helped bolster confidence in the second day of trading following the Lunar New Year holiday.

The Shanghai Composite Index leapt 3.3 per cent to finish at 2,836.57 — a three-week high — while the blue chip China Securities Index rose 3.1 per cent to end at 3,037.03.

In Shenzhen, the index jumped 4.1 per cent to close at 1,821.71, helped by gains in the information technology and industrial sectors.

On Monday night, China’s Premier Li Keqiang helped to shore up market confidence as he held the first state council executive meeting after the Chinese New Year.

“China still has huge potential for economic growth, given the high saving rate, as well as plenty of room to maneuver. We will step in decisively, once the economy shows signs of unreasonable slowdown,” Li said.

In Shanghai, energy and financial stocks lead the surge as stronger oil prices and reassurances by the premier helped to encourage investors.

“Investors are concerned about the triple ‘C’ — China, commodities and currencies,” KGI Asia executive director Ben Kwong said.

“Market fears lessening a little bit because of a rebound of the oil prices and the strong performance of the A-share market on Monday.”

Hong Kong-listed oil and energy companies advanced in the morning session, tracking gains in crude oil prices. On Monday, Brent crude advanced to surpass US$34 per barrel.

State-owned Petro China gained 6.42 per cent to HK$4.97 by the close of trading in Hong Kong, while its peer Sinopec also rose by 2.3 per cent to HK$3.11.

In Shanghai, Henan Yuguang Gold and Lead saw a rise of 10 per cent in its share price, ending the session at 21.32 yuan (HK$25.48), while CITIC Securities was the most-traded stock of the day, rising 6.08 per cent to 14.83 yuan.

Data released Tuesday showed China attracted 88.25 billion yuan in foreign direct investment in January, up 3.2 per cent year-on-year.

But Kwong said a dip in Hong Kong’s share price on Tuesday afternoon, after strong gains in the morning, showed investor confidence was still fragile.

“Investors remain relatively cautious because they’re sceptical about whether the rebound is sustainable,” he said. “If you look at the market turnover I don’t think momentum is very strong.”

The Hang Seng Index gained as much as three per cent on Tuesday but in early afternoon began to weaken, closing the session only 1.08 per cent higher at 19,122.08.

The China Enterprise index gave back some of its gains in the afternoon session as well, but remained relatively upbeat closing at 8,028.34, or 2.09 per cent higher.

Over the weekend, Zhou Xiaochuan, governor of the People’s Bank of China told Caixin financial magazine that he saw no basis for depreciation of the yuan. He said Beijing had no plan to tighten capital controls to stem capital outflows.

Elsewhere around the region, Japanese markets saw early gains but were unable to hold them — Tokyo’s Nikkei 225 ended 0.2 per cent higher at 16,054.43, while South Korea’s Kospi rose 1.40 per cent to 1,888.30.