Market Wrap: Cement, infrastructure plays extend gains on NDRC stimulus

Cement-makers and infrastructure firms extended gains on Monday, buoyed by speculation that fast-tracked approvals for  infrastructure projects last week would boost their earnings profiles, while less than stellar Chinese economic data also strengthened the case for further government measures to boost the world's second largest economy.

“China’s policy easing measures will focus on improving urban infrastructure and increasing land supply...,” Ting Lu, China economist at Bank of America Merrill Lynch, said after looking at China's latest trade data. “Adding home supply and improving urban infrastructure are the two best ways to contain home prices, speed up urbanization and increase social welfare.”

China's top cement-maker BBMG Corp. (2009.HK) gained 5.28 per cent to end at HK$5.58. China Communications Construction (1800.HK) rose 3.69 per cent to close at HK$6.46 after Citi upgraded the stock to “buy”, saying NDRC's fast-tracked infrastructure approvals last week made the outlook for infrastructure "more promising”.

The benchmark Hang Seng Index gained 25.01 points, or 0.13 per cent, to end at 19,827.17, as China's trade data, particularly the import numbers in August, turned out weaker than expected. The Hang Seng China Enterprises Index (HSCEI) dropped 34.61 points, or 0.37 per cent, to end at 9,393.60.

“Investors started to lock in profit after Friday’s rally,” said Kevin Man, research analyst at Phillip Securities. While some investors are seeking out mainland infrastructure related companies, Man suggested investors focus on Hong Kong-based defensive stocks such as utilities and food & beverage producers, avoiding China-related players as the economy outlook is still uncertain.

China’s export growth rose slightly to 2.7 per cent from a year earlier in August, while imports unexpectedly contracted 2.6 per cent from a year earlier, data showed Monday. Meanwhile, the nation’s producer price index (PPI), a gauge of corporate earnings, fell to a 34-month low last month, data showed Sunday.

“Third-quarter year-on-year GDP growth will almost surely be below 7.6 per cent in the second quarter, and could be even slightly lower than our below-consensus forecast at 7.4 per cent,” said Bank of America Merrill Lynch’s Lu.

China Pacific Insurance (Group) (2601.HK) lost 1.30 per cent to HK$22.7, following a new equity sale plan announced on Sunday to raise around US$1.34 billion to bolster solvency ratios. Government of Singapore Investment Corporation, Norges Bank, and Abu Dhabi Investment Authority will buy the new shares at HK$22.05 each.

China Construction Bank (0939.HK) lost 2.12 per cent to finish at HK$ 5.07 after a news report that said one of its shareholders had sold a large chunk of its shares last Friday to raise up to HK$4 billion. Chinese steelmaker Baosteel is said to behind the sale, sources told South China Morning Post.