China’s stocks climb most in two weeks in rotation to large caps; Hong Kong shares narrow losses
- Economic recovery optimism buoys up the old-economy stocks, boosting materials and industrial companies
- Property developers and casino operators decline in Hong Kong
China’s stocks rose the most in two weeks, rebounding from a weekly loss, on optimism that economic recovery in the Asian nation is gaining traction, boosting old-economy shares from commodity producers to industrial companies. Hong Kong’s benchmark trimmed losses.
The Shanghai Composite Index jumped 3.1 per cent, or 100.02 points, to 3,341.15 on Monday for the steepest gain since July 6.
The renewed momentum on Chinese stocks, which added US$1 trillion in market cap over the past three weeks in the world-beating rally, partially allayed concerns that the bull run was coming to an end. The benchmark tumbled 4.5 per cent on Thursday on angst that the run-up was too fast.
Monday’s mainland rally marked a shift in rotation to large-caps engaged in traditional industries from smaller companies that had led the gain on the broader market. The ChiNext index of growth stocks traded at the most expensive level relatively to the Shanghai Composite in six years this month on the price-to-earnings ratio basis, according to Bloomberg data.
“With the better growth recovery materialising, we see merit in adding sector leaders in the value camp that are exposed to cyclical growth upside,” said Wendy Liu, head of China strategy at UBS Group. “The big gap in valuation between growth and value, favourable liquidity and risk-on sentiment are also helping quality cyclicals.”