Mainland China shares reach 19-month high on upbeat corporate earnings

Hang Seng Index closes up 1.2 per cent, or 329 points, to 27,848

PUBLISHED : Friday, 25 August, 2017, 9:25am
UPDATED : Friday, 25 August, 2017, 9:42pm

Hong Kong and mainland stocks advanced yesterday, with the benchmark Shanghai Index closing above 3,300 points for the first time since January 2016 after major companies including PetroChina and Bank of Communications reported earnings that exceeded estimates.

The Shanghai Composite advanced 1.8 per cent, or 60.01 points, to 3,331.5, its biggest daily gain since July 19. Trading volumes on the Shanghai Stock Exchange were 22 per cent below the 30-day average. The CSI 300 Index of large companies advanced 1.6 per cent.

The Shanghai Composite broke through the major technical resistance level of 3,300 points – after coming close to doing so twice since last November – as stabilisation in China’s economy bolstered corporate earnings. About half of the 1,279 companies on the index have already released first-half results, reporting an average 24 per cent earnings increase compared with 19 per cent average growth for the previous six-month period, according to data compiled by Bloomberg.

“These big-caps’ earnings are strong and did not fall out of line with market expectations,” said Wang Chen, a partner with Xufunds Investment Management in Shanghai. “Judging from these earnings, the growth trend would be there going forward and that would help the Shanghai Composite to hold well above 3,300.”

Measures tracking financial and energy producers climbed at least 1.4 per cent yesterday, reflecting the biggest gainers among the industry groups. Gains in Industrial and Commercial Bank of China, China Life and PetroChina contributed to more than a fifth of the advance on the Shanghai Composite.

These big-caps’ earnings are strong and didn’t fall out of line with market expectations
Wang Chen, a partner with Xufunds Investment Management

PetroChina, the nation’s biggest oil producer added 1.38 per cent to 8.07 yuan in Shanghai and jumped 3.7 per cent to HK$5 in Hong Kong. The company’s first-half profit increased to 12.7 billion yuan (HK$14.9 billion), beating the average projection of 10.6 billion yuan in a Bloomberg survey of three analysts. Meanwhile, the company proposed that the entire profit for the first six months be paid out as interim dividends.

China Life Insurance jumped 5.9 per cent to 29.27 yuan, the biggest gain since November 22. The insurer’s new business value, a gauge of the future profitability of new policies, rose 32 per cent from a year earlier to 36.9 billion yuan in the first six months. The shares added 4.17 per cent to HK$25 in Hong Kong.

Bank of Communications advanced 5.6 per cent to 6.62 yuan in Shanghai. The firms first-half profit increased 3.5 per cent to 39 billion yuan from a year ago. The stock gained 3.65 per cent to HK$5.95 in Hong Kong.

ICBC, the country’s biggest bank by assets, gained 4 per cent to 6.16 yuan, the highest close since May 2008. Net income for the first six months may have risen 2 per cent to 153.3 billion yuan, according to Bloomberg data. The interim report is due next Thursday.

In Hong Kong, the Hang Seng Index gained 1.2 per cent, or ­ 329 .56 points, to 27,848.16. The Hang Seng China Enterprises Index, or the H-share gauge, climbed 2.2 per cent to 11,288.36.