China shares have best day in two months, Hong Kong strong too
China shares had their best day in more than two months on Friday and helped buoy Hong Kong, led by a strong rebound in financials and properties as worries about China’s cash crunch eased.
The People’s Bank of China said on Friday it would guide financial institutions to maintain reasonable lending policies, which reduced market concerns as investors covered short positions ahead of the half-year.
The Shanghai Composite Index ended up 1.5 per cent at 1,979.20 points, while the CSI300 of the leading Shanghai and Shenzhen A-share listings rose 1.9 per cent.
Both had their biggest daily percentage gain since April 24. They fell around 12 per cent in the second quarter.
The Hang Seng Index rose 1.8 per cent at 20,803.29 points, while the China Enterprises Index of the top Chinese listings in Hong Kong gained 1.7 per cent.
Both climbed to their highest closings in one week. But for the quarter, the Hang Seng lost 6.7 per cent while the HSCE shed 14.5 per cent.
Hong Kong markets will be closed on Monday for a public holiday.
“Looking ahead, investors may take profit after the recent rebound,” said Patrick Yiu, a director at CASH Asset Management.
He said that he’s concerned about company profitability and earnings prospects as the Chinese economy slows.
“Instead of jumping into the market, we concern more about the profitability of companies and we will focus more on the visibility of their earnings prospects in the slowing China economy,” Yiu said.
On Friday, China’s central bank chief Zhou Xiaochuan told a financial forum in Shanghai that it wouldlensure reasonable lending growth and will adjust market liquidity in an appropriate manner.
And just before the Hong Kong market closed, China’s market regulator said the market performance has stabilised and the impact of sudden shocks is fading.
In China, the one-week cash rate fell on Friday to its lowest since before last week’s sharp credit squeeze.
China’s rebound was led by smaller banks, which are more reliant on short-term interbank funding and were badly hit during the past week.
China Minsheng Bank, which had big recent losses, was up 4.4 percent in Shanghai and Everbright Bank rose 4.7 percent.
The country’s two largest lenders, Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB) climbed 5.5 and 1.7 per cent, respectively.
Chinese property stocks jumped on mainland media reports about relaxation of financing for mainland property companies, although some analysts were doubtful that there will be any major changes in policy in the near term.
Officials at the China Securities Regulatory Commission declined to comment on the reports.
The sector was also boosted after a Shenzhen area development agency said on Thursday it would invest 389.8 billion yuan (HK$488.2 billion) before the end of 2015 in developing comprehensive infrastructure in the region.
On the mainland, China Vanke surged 8.4 per cent, its best daily showing since Jan. 21, while Poly Real Estate jumped 6.2 per cent in its best day since September 2012.
In Hong Kong, China Overseas Land and Investment rose 4.6 per cent, while China Resources Land gained 4.2 per cent.
Shares of conglomerate China Resources Enterprise rose 3.8 per cent to HK$24.35 after broker BOC International upgraded the stock to buy from hold and raised its price target to HK$25.90 from HK$23.50.