China stocks climb to four-week high as investors assess companies’ earnings in post-pandemic era

Shanghai Composite Index adds 0.5 per cent to 3,484.39, capping a 1.9 per cent gain for the week
Benchmarks in Japan and South Korea edge higher after the S&P 500 index crossed the 4,000 mark for the first time

China stock market

Zhang Shidongin Shanghai

Published: 10:33am, 2 Apr 2021

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China’s stocks rose to the highest level in four weeks, with the benchmark posting the biggest five-day gain in almost two months, as traders await the release of more earnings results.

The Shanghai Composite Index closed 0.5 per cent higher at 3,484.39 on Friday, completing a 1.9 per cent gain for the week. Semiconductor Manufacturing International Corp (SMIC) led technology companies higher after profit at the chip maker more than doubled last year, while consumer-staples stocks also rallied.

Trading was light, with the daily volume 17 per cent below its 20-day average, primarily because of the festive mood.

Markets on the mainland will be shut on Monday for a public holiday, while many Asian markets including Hong Kong and Australia were closed for the Easter holiday on Friday. Trading in Hong Kong will resume on Wednesday.

Equity gauges in Japan and South Korea both closed higher, tracking overnight gains on Wall Street that sent the S&P 500 index above 4,000 for the first time. US investors continued to cheer President Joe Biden’s US$2.25 trillion infrastructure spending, looking past rising coronavirus infections globally that have prompted Chile to close its border and France to reimpose lockdown.

Chinese stocks have been trading sideways over the past month, as the world-beating rally in popular bets, such as liquor distillers and new-energy companies fizzles amid concern about policy tightening. With the earnings season in full swing, investors have remained focused on corporate results for clues on how listed companies have navigated through the post-pandemic era.

“We may see a rebound going forward, which will be modest though,” said Cai Fangyuan, an analyst at China Galaxy Securities.

“We are in the peak season for earnings releases. For the rebound to accelerate, we need more and bigger catalysts,” Cai added, referring to more positive earnings surprises.

With about a third of the 1,500-plus companies on the Shanghai Composite publishing annual reports, the results trailed analysts’ estimates by 14 per cent so far, according to Bloomberg data. Profits fell by an average 8 per cent from a year earlier, the data showed.

People walk past the New York Stock Exchange on Wall Street. The benchmark S&P 500 Index rose to an all-time high on Wednesday. Photo: AFP

Still, macro-data points to further strengthening of the recovery in China. An official report showed this week that China’s manufacturing expanded for a 13th straight month in March. First-quarter economic growth probably accelerated to 18 per cent from a low base a year earlier, when the economy contracted by 6.8 per cent because of the damage caused by the pandemic, according to the estimate of economists polled by Bloomberg. The data is due on April 16.

SMIC surged 5.2 per cent to 58.77 yuan on Shanghai’s Star Market, extending a 2.9 per cent gain on Thursday after China’s biggest chip maker posted a 142 per cent year-on-year jump in net income to 4.33 billion yuan (US$660 million).

Beijing Hengyu Datacom Aviation Equipment jumped 108 per cent from the initial public offering price to 128.38 yuan on its first day of trading in Shenzhen.

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