China stock market

China’s stocks rise most in month ahead of joining MSCI benchmarks, growth prospects

Fund managers buy US$1 billion of mainland equities through the stock connect schemes on Thursday, the most since April 18

PUBLISHED : Thursday, 31 May, 2018, 5:33pm
UPDATED : Thursday, 31 May, 2018, 10:46pm

China’s stocks rose the most in a month on Thursday, as global investors loaded up on yuan-traded equities ahead of the shares officially joining the MSCI benchmarks and positive manufacturing industry data bolstered optimism on the economic outlook.

The Shanghai Composite Index climbed 1.8 per cent, or 54.03 points, to 3,095.47 at the close, the biggest gain since April 24. The gain, the first in seven days, also helped the gauge to end May in positive territory with a monthly advance of 0.4 per cent. The CSI 300 Index of bigger companies jumped 2.1 per cent and the ChiNext gauge of small-caps added 1 per cent. Hong Kong’s Hang Seng Index also climbed as concerns about the political impasse in Italy eased.

The mainland’s equities almost recouped losses from a sell-off that sent the Shanghai Composite slumping by 2.5 per cent on Wednesday, as overseas investors boosted buying to mimic the change of constituents on the MSCI Emerging Markets Index that will include 234 mainland-traded stocks for the first time on June 1.

The official manufacturing Purchasing Managers’ Index for May, which showed the manufacturing industry expanding at the fastest pace since September, also lifted the mood.

“It’s an important window of time for China’s stocks and it looks like that inflows into heavyweights are swelling because of the MSCI inclusion,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai. “The macroeconomy is in good shape and the economic data tells investors that they don’t need to worry too much about the recent wave of corporate bond defaults. The risk is generally controllable.”

Overseas investors bought a net 6.63 billion yuan (US$1.04 billion) of mainland equities through the link schemes with the Hong Kong exchange on Thursday, the most since April 18.

MSCI’s inclusion covers Chinese stocks that are well-known to overseas investors, including fiery distillers Kweichow Moutai and Wuliangye Yibin, Ping An Insurance Group and air-conditioner maker Gree Electric Appliances.

Consumer stocks were the focus of foreign buying, with gauges of consumer staples and discretionary shares rising at least 3.8 per cent. Kweichow Moutai gained 3.5 per cent to 751.13 yuan, with trading volumes jumping 81 per cent higher than the 30-day average, and Wuliangye added 2.8 per cent to 78.98 yuan. Qingdao Haier, China’s biggest fridge maker, surged 6.7 per cent to 20.10 yuan and China International Travel Service advanced 6.3 per cent to 67.65 yuan.

In Hong Kong, the Hang Seng Index added 1.4 per cent, or 411.77 points, to 30,468.56, paring the loss to 1.1 per cent for the month. The Hang Seng China Enterprises Index, or the H-share gauge, gained 1.8 per cent.

China Petroleum & Chemical, also known as Sinopec, jumped 6.1 per cent to HK$7.67 and PetroChina rose 3.3 per cent to HK$6.49. CNOOC gained 2.5 per cent to HK$13.20. Crude oil futures traded near the highest level since 2014 as US President Donald Trump decided to renew American sanctions on OPEC member Iran and output fell in Venezuela because of the ongoing economic crisis.

Casino stocks rose before the release of monthly gaming revenues. Sands China rallied 2.4 per cent to HK$46.95 and MGM China Holdings climbed 2.9 per cent o HK$22.80.