Chinese stocks rise with stable yuan, but drug firms tumble on vaccine scandal
New rules on wealth management firms that were less stringent than expected also help lift the market
Chinese stocks rose on Monday as the yuan currency stabilised and the market regulator took a softer stance on rule changes for wealth management products, although pharmaceutical shares plunged amid a scandal over vaccines.
The Shanghai Composite Index rose 1.1 per cent to 2,859.54, with financials leading the gains. In Hong Kong, the Hang Seng Index edged up 0.1 per cent to 28,256.12, extending its gains from Friday after recent sharp falls.
The yuan strengthened against the US dollar on Monday after US President Donald Trump accused China and the European Union of currency manipulation in tweets posted on Friday. The yuan has weakened almost 5 per cent since mid June to a 12-month low against the dollar on Thursday.
Meanwhile China’s central bank’s long-awaited guidelines on commercial banks’ wealth management products, released on Friday, were less severe than expected as the regulator sought to balance its efforts to rein in shadow banking while maintaining stable economic growth.
The new rules were introduced under the government’s broader campaign to crack down on systemic risks in the US$15 trillion wealth management products market. The rules aim to make sure banks and other financial institutions invest the funds in less risky ways.
The stable currency and rule changes for wealth management products that “turned out to be more flexible than many expected” provided strength to the stock market, said Kingston Lin King-ham, a director at AMTD securities brokerage.
“Trump’s dissatisfaction with the strong dollar has taken some downward pressure off the yuan,” Lin said.
Among financials, Agricultural Bank of China, one of China’s big four state-owned commercial banks, rose 1.7 per cent in Shanghai to 3.60 yuan. Industrial and Commercial Bank of China (ICBC) was up 2.2 per cent to 5.59 yuan and China Construction Bank increased 2.1 per cent to 6.92 yuan.
Infrastructure-related shares also jumped as Chinese President Xi Jinping’s current visit to four African nations is expected to bring more construction deals. Cement producer and property developer BBMG rose 4.1 per cent to 3.54 yuan, Xinyu Iron & Steel jumped 9.7 per cent to 7.04 yuan and China State Construction Engineering, the largest construction company in the world, was up 6.9 per cent to 5.55 yuan.
However pharmaceutical stocks were hit hard after Changsheng Bio-technology, a Shenzhen-listed firm, was found by regulators to have the fabricated production and inspection data of its rabies vaccines.
It fell by the 10 per cent daily limit for the sixth straight day, pulling the Health Care Index, which tracks the performance of 22 pharmaceutical stocks on China’s blue-chip CSI 300 Index, down 4.1 per cent.
In Hong Kong, mainland Chinese insurers and banks gained. China Pacific Insurance, the nation’s third-largest insurer, rose 1.2 per cent to HK$29.85, while ICBC’s Hong Kong shares were up 1.3 per cent at HK$5.63.