China stocks hit nearly 3-month high as insurers continue rally on policy boost expectations

Hong Kong stocks pare declines at close as insurers and car manufacturers help offset losses in banks and telecoms

PUBLISHED : Thursday, 06 July, 2017, 10:13am
UPDATED : Thursday, 06 July, 2017, 10:30pm

Shanghai stocks staged a V-shaped rebound on Thursday to close at the highest level in nearly three months, as insurers continued their rally after a government policy paper encouraged commercial pension funds to invest in stock markets.

In Hong Kong, Chinese insurers also helped offset losses in the bank and telecom sectors, with the benchmark index paring its decline at close.

The Shanghai Composite Index opened slightly lower and slipped below 3,200 around noon. However, it reversed course and turned higher in the last hour of trading, before closing up 0.2 per cent, or 5.31 points, at 3,212.44, the best level it has seen since mid-April.

The large-cap CSI300 ended flat at 3,660.10.

On the Shenzhen Stock Exchange, the Shenzhen Composite Index and the ChiNext index both finished up 0.1 per cent, at 1,914.59 and 1,839.99 respectively.

Combined turnover for Shanghai and Shenzhen markets increased 16 per cent from Wednesday to 476 billion yuan (US$70 billion).

Insurance stocks extended their rally to a second straight day.

The new policy to speed up the development of commercial pension insurance has triggered a rally in insurers
Linus Yip, First Shanghai Securities.

“The new policy to speed up the development of commercial pension insurance has triggered a rally in insurers,” said Linus Yip, chief strategist for First Shanghai Securities.

According to the guidelines issued by the State Council on Wednesday, commercial pension funds will also be allowed to invest in stocks and bonds in the future.

The news has provided a short-term boost to major insurance companies, Yip said.

In Shanghai, Ping An Insurance advanced 1.9 per cent to close at 51.38 yuan. China Life Insurance gained 1.5 per cent to 27.8 yuan while New China Life Insurance surged 4.8 per cent to 56.28 yuan.

Shanghai Fosun Pharmaceutical Group, owned by Chinese tycoon Guo Guangchang, slid 3.7 per cent to close at 30.19 yuan on the Shanghai Stock Exchange.

Hong Kong-listed Fosun International also trimmed earlier losses and ended down 0.2 per cent at HK$12.02.

On Thursday, Hong Kong’s benchmark Hang Seng Index edged down 0.2 per cent, or 56.75 points, to close at 25,465.22.

“Investors are turning cautious now, as they do not see obvious positive signals after the Hang Seng Index recorded six straight months of gains in the first half,” said Victor Au, chief operating officer at Delta Asia Securities.

“I do not expect a big rise for Hong Kong stocks in the third quarter.”

The Hang Seng China Enterprises Index, which tracks the performance of Hong Kong-listed Chinese companies, dropped 0.3 per cent, or 34.41 points, to close at 10,346.32.

Daily turnover for Hong Kong stocks reached HK$78 billion, slightly down from Wednesday’s HK$84 billion.

People’s Insurance Company of China (PICC) surged to 18-month high, closing up 6 per cent at HK$3.52. PICC Property & Casualty also soared 6.6 per cent to HK$14.5.

Ping An Insurance’s Hong Kong-listed shares rose 1 per cent to HK$54.35, the highest level in two years.

New China Life Insurance’s H shares also added 1.5 per cent to HK$42.1.

Car manufacturers also mostly advanced, with Great Wall Motor up 7.9 per cent to HK$10.54 after Morgan Stanley upgraded the rating to Overweight. Guangzhou Automobile Group jumped 2.8 per cent to HK$15.66.

Tencent, the operator of China’s dominant social network and publisher of the world’s most popular role-playing mobile game Honour of Kings, added 0.3 per cent to HK$271.8, up for a second day.

The stock tumbled 4.1 per cent on Tuesday, after a commentary in the People’s Daily newspaper described Honour of Kings as “poison” and a “drug” that’s harming teenagers.

However, China Mobile and China Unicom both declined heavily after Morgan Stanley cut their stock ratings to underweight due to low estimated returns on 5G network investment.

China Mobile dropped 1 per cent to HK$80.3 and China Unicom fell 1.9 per cent to HK$10.6.

China Telecom was flat at HK$3.66, as Morgan Stanley maintained its overweight rating, while reducing its target price to HK$4.2.

Bank shares were also weak, with China Merchants Bank falling 1.5 per cent to HK$23.4, Agricultural Bank of China down 1.1 per cent to HK$3.47, and China Construction Bank off 0.7 per cent to HK$5.98.

With additional reporting by Yu Yifan