Mainland China stocks cheered by hopes of pension fund buying; Hong Kong investors await earnings reports

The Shanghai Composite Index rose 1.2 per cent to close at 3,239.96, its highest level since early December

PUBLISHED : Monday, 20 February, 2017, 9:27am
UPDATED : Monday, 20 February, 2017, 10:58pm

Shanghai stocks posted their biggest daily rally in over three months on Monday as investors were cheered by a report that China’s massive pension funds could invest another 10 billion yuan in buying domestic equities as early as this week.

The Shanghai Composite Index jumped 1.2 per cent or 37.89 points to close at 3,239.96, the highest level since early December, while the CSI300 – which measures the performance of large companies listed in Shanghai and Shenzhen – gained 1.5 per cent to 3,471.39.

The Shenzhen Component Index and the Nasdaq-style ChiNext index rose 1.3 per cent and 0.6 per cent respectively to 10,329.0 and 1,894.96.

The first wave of investments by the state pension funds’ equity portfolio managers are set to release 10 billion yuan onto domestic equity markets as early as this week, the state-run Securities Times said Monday on its official Weibo account.

Before the Lunar New Year holidays, the 5-trillion-yuan (US$728 billion) pension fund had already allowed managers of other portfolios to start investing in A-shares, the newspaper said.

“It will be a significant boost to market stability and investor confidence, although we don’t anticipate much money to be invested at first,” said Fu Chuankui, an analyst for Dongguan Securities. “It may be a gradual progress.

In mainland markets, shipping operators were among the biggest gainers on Monday. Cosco Shipping Specialised Carriers jumped 10 per cent to 7.59 yuan while Cosco Shipping Holdings added 4.8 per cent to 6.34 yuan. Wine spirit producers also outperformed. Sichuan Swellfun was up 7.5 per cent to 22.49 yuan while Wuliangye Yibin jumped 6.29 per cent to 41.4 yuan.

It will be a significant boost to market stability and investor confidence, although we don’t anticipate much money to be invested at first
Fu Chuankui, an analyst for Dongguan Securities

Separately, Hong Kong stocks continued last week’s rally to close at their highest level in five months, mainly driven by the rise of blue chips on the expectation of earnings outperformance.

The Hang Seng Index closed at 24,146.08, up 0.5 per cent or 112.34 points. The Hang Seng China Enterprises Index, or H-share index, was up 0.8 per cent or 85.35 points to 10,445.48.

“The rising momentum of Hong Kong stocks could remain this week, but investors should take a cautious attitude when the city’s benchmarket breaks 24,300, [which was] the peak last September,” said Victor Au, the chief operating officer at Delta Asia Financial.

This week investors will be closely watching a barrage of corporate earnings, including the results of HSBC and Hang Seng Bank due on Tuesday. AIA, the world’s third-largest life insurer by market value, will release its annual results on Thursday.

HSBC jumped 1 per cent to HK$69 while Hang Seng bank was down 0.2 per cent to HK$163.10.

Mengniu Dairy was the best performer in the HSI 50 components, up 3 per cent to close at HK$15.54, following a 3.2 per cent loss last week. JP Morgan issued a report late last week that said the company was its favourite Chinese dairy stock, anticipating an 8 per cent increase in 2017 revenues.

China’s Ministry of Agriculture also said recently it plans to offer more policy support to the dairy industry this year, including increasing state subsidies for growing high-quality alfalfa and supporting dairy brands to expand their international influence.

Alibaba Pictures tumbled 3.5 per cent to HK$1.36 after the company said in an exchange filing late last week it projected a loss of 950 million yuan to 1 billion yuan for 2016, swinging from a net profit of 466 million yuan in the previous year.

Tenwow International Holdings, a packaged food and beverage producer, dropped 13.3 per cent to close at HK$1.7 after the company said last Friday that it expects to record a drop in its unaudited net profits by approximately 35 per cent to 45 per cent in 2016.

Among newly listed stocks, Shanghai-traded Fujian Haixia Environmental Protection Group, which provides water treatment and sewage services, soared by its daily-increase limit of 44 per cent to 5.82 yuan, versus its IPO price of 4.04 yuan.

Shenzhen-listed Shanghai Fullhan Microelectronics, a designer and producer of digital video recorders, also rose 44 per cent to 80.12 yuan, while Zhejiang Meili High Technology, an industrial spring manufacturer, was up 44 per cent to 17.24 yuan.

However, construction contractor Able Engineering Holdings, which debuted in Hong Kong on Monday, fell 9.1 per cent to HK$1 from its IPO price of HK$1.10.

US stock markets will be closed for a public holiday on Monday.