China’s stocks, among the world’s best performers this year, continue to rise even as traders ask if run-up is too good to last

The Shanghai Composite closes at the highest in five months even as a technical gauge says stocks are overbought and may fall

China International Capital Corporation surges in Hong Kong after Alibaba buys stake

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A man studies an electronic stock board at a brokerage house in Nanjing, Jiangsu province, China on February 13, 2019. Photo: Reuters

Published: 10:46am, 20 Feb 2019Updated: 10:52pm, 20 Feb 2019

China’s stocks rose to send the benchmark gauge to a five-month high, defying a technical indicator that signalled stocks are entering an overbought territory. Hong Kong’s stocks also advanced.

The Shanghai Composite Index added 0.2 per cent, or 5.57 points, to 2,761.22 at the close on Wednesday. It ended the day at the highest level since September in see-sawing trading, in which the gauge changed directions at least nine times. The Hang Seng Index advanced 1 per cent, or 285.92 points, to 28,514.05.

Agricultural stocks led the gains on the mainland equities after the State Council issued the so-called No. 1 document to prioritise development in the rural areas. China International Capital Corporation surged to a nine-month high in Hong Kong after Alibaba Group Holding boosted its interest in the investment bank.

Alibaba acquires 4.84 per cent stake in mainland China bank CICC to become third-largest shareholder after Tencent

“Investors’ expectations about the economy have been improving and the risk-on mode has been turned on,” said Wang Zheng, chief investment officer at Jingxi Investment in Shanghai “But the market needs a break here, after the recent decent performance and some technical indicators show stocks are a bit overheated.”

The mainland’s equity gauge has gained 11 per cent this year, making it among the best performers among the world’s major markets, as authorities ramp up policy support to boost growth and foreign investors increase buying. Still, the run-up lifted the Shanghai Composite’s 14-day relative strength index to 72.1, above the 70 threshold indicating that stocks are overbought and poised to fall. The Hang Seng Index has climbed 10.3 per cent in 2018.