Shanghai stocks at 22-month high, HK rebounds from two-day loss after China’s new leadership team is unveiled
Momentum is expected to continue in Hong Kong on further fund inflows
Mainland Chinese and Hong Kong stocks both closed with modest gains on Wednesday, after China revealed its new leadership line-up, with President Xi Jinping re-elected for his second five-year term as party chief.
Mainland China’s Shanghai Composite Index ended 0.3 per cent higher at 3,396.9, up for a fourth straight day, marking its best finish since December 2015.
The CSI 300, which tracks large-cap companies on the Shanghai and Shenzhen stock exchanges, rose 0.4 per cent to 3,976.95. The Shenzhen Composite Index added 0.8 per cent to 2,025.32, and the start-up board index ChiNext settled 0.6 per cent higher at 1,913.26.
Combined daily turnover for Shanghai and Shenzhen reached 389 billion yuan, about 4 per cent lower from Tuesday.
“The curtain has fallen on the 19th party congress. The market has been stable, as investors remained cautiously optimistic,” said Zhang Gang, an analyst for Central China Securities.
The elite seven-member Politburo Standing Committee was announced on Wednesday. While President Xi Jinping remains as the head and Premier Li Keqiang as the No 2, five of the seven members of the party’s highest decision-making body were replaced, confirming previous exclusive reports by the South China Morning Post.
The five new members are Li Zhanshu, Wang Yang, Wang Huning, Zhao Leji and Han Zheng.
During the period of the 19th party congress from October 18 to October 24, the Shanghai Composite Index was practically flat.
Hangzhou Huning Elevator Parts, a manufacturer of lift parts in Zhejiang, gained 6 per cent to close at 30 yuan. The stock briefly soared 10 per cent on the Shenzhen Stock Exchange at the start of the afternoon session.
“After the congress, more details about economic and industry development plans may be unveiled, which could trigger investors’ new enthusiasm,” Zhang said.
On Wednesday, Hong Kong’s Hang Seng Index rose for the first time in three days, up 0.53 per cent, or 147.92 points, to close at 28,302.89. The Hang Seng China Enterprises Index, known as the H-shares index, gained 0.77 per cent to 11,493.3.
Daily turnover for Hong Kong’s main board decreased 13 per cent to HK$77.8 billion from Tuesday.
The city’s stocks, the best performers among Asia’s major equity markets with a 29 per cent gain this year, rose to an almost 10-year high last week before some traders sold stocks to take some profits from the rally.
“There’s no problem with the momentum in Hong Kong’s market,” said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai.
“Liquidity seems to be adequate as there are lots of fund inflows from overseas and the mainland.”
Cheng Yu, a fund manager at HSBC Jintrust Fund Management in Shanghai, said that Hong Kong stocks may extend their rally into the fourth quarter, as earnings improve amid stabilising growth in China and as inflows of global funds further boost valuations.
Overseas investors will shift more allocations to Hong Kong stocks and other emerging markets from more expensive US equities and Chinese mainland traders will continue to channel funds through exchange links, he said.
Tencent gave a 40-point boost to the Hang Seng Index, which ended up 1.3 per cent at HK$352.
Snack food supplier Want Want China and pork processor WH Group were the biggest outperformers, up 3.5 per cent and 3.2 per cent respectively to HK$6.27 and HK$7.81.
Smithfield, a subsidiary of WH, struck a strategic partnership with JD.com, whose fresh food division will become the only online sales platform for its pork products in China, WH Group said in a statement.
Car manufacturer Geely Automobile Holdings also rallied 2.4 per cent to HK$25.7, extending its year’s gain to nearly 250 per cent.
Real estate developer China Overseas Land & Development, a Hang Seng constituent, climbed 2.3 per cent to HK$26.15.