Chinese stocks rise to two-week high as machinery makers surge on price increase expectations

Mainland stocks rose to the highest level in two weeks on Tuesday, as XCMG Construction Machinery led machinery makers higher on expectations about increasing industry-wide prices, while gas suppliers jumped by the daily limit amid surging liquefied natural gas prices.

The Shanghai Composite Index added 0.8 per cent, or 25.66 points, to 3,306.13. The CSI 300 Index gained 0.3 per cent. Hong Kong’s market remains shut on Tuesday for a public holiday and will reopen Wednesday.

Combined turnover on the Shanghai and Shenzhen exchanges totalled 360.9 billion yuan (US$55.2 billion) on Tuesday, about a fifth lower than the daily average for the year.

The Shanghai Composite has been consolidating over the past three weeks, after a sell-off in the year’s best-performing stocks including liquor and insurance companies sent the benchmark down as much as 5.3 per cent from this year’s high set on November 13. Still, the index remains up 6.5 per cent for the year.

“The market is in a fluctuating mode and it’s unlikely to break out of it towards the year end when liquidity is pretty tight,” said Wei Wei, a trader at Huaxi Securities in Shanghai. “There will be some thematic investment opportunities but the performance on the broader market will be muted.”

The pullback on Chinese stocks is close to its end, according to Xun Yugen, a strategist at Haitong Securities in Shanghai. He said recent trading volume and turnover have already dropped to levels seen in the previous three retracements this year.

A measure of industrial companies jumped 1.3 per cent on Tuesday for the biggest gain among the industry groups after Guotai Junan Securities and Zhongtai Securities said global machinery giant Komatsu will raise product prices in China starting January 1.