Shanghai stocks rise to 10-month high, lifted by gains in insurers

Hong Kong’s Hang Seng ends fractionally higher, rising 0.1 per cent, while the H-share index tacks on 1 per cent

PUBLISHED : Monday, 21 November, 2016, 8:58am
UPDATED : Monday, 21 November, 2016, 9:21pm

China’s A-share market inched up to a 10-month high on Monday, driven by gains in the insurance sector, as rising US Treasury bond yields were seen as a good news for companies that rely on returns from fixed-income securities.

The Shanghai Composite Index edged up 0.79 per cent or 25.29 points to close at 3,218.15, the highest level since January 6. CSI 300 Index, which tracks companies listed in Shanghai and Shenzhen, was up 0.69 per cent or 23.66 points to 3,441.11.

China Life Insurance, the country’s largest life insurer, saw its A-shares end 7.8 per cent higher at 24.76 yuan, the highest closing level since early January, after earlier surging by its 10 per cent daily limit.

Ping An Insurance Group Co of China, the largest insurer by market value, rose 2.54 per cent to 35.9 yuan.

In Hong Kong, the two insurers were the best performers among the 50 blue chips. China Life shares jumped 4.96 per cent to HK$20.95, while Pingan shares gained 3.34 per cent to HK$41.80.

The Hang Seng Index ended little changed at 22,357.78, up 0.06 per cent, while the Hang Seng China Enterprises Index rose 1.02 per cent to 9,444.71. Insurance, brokerage houses and casino stocks gained, offsetting a drop in semiconductor and retailing sectors.

“China’s insurance stocks have been undervalued for a long time, while the rise of bond yields globally following Donald Trump’s win in the US presidential election will benefit conservative investors like insurers,” Ivan Li Sing-yeung, head of research at Sinopac Securities (Asia) said.

Yields on 10-and 30-year US Treasuries hit their highest levels of the year last week. But the higher yields were also seen in other markets, with China’s 10-year bond yield also rising 15 basis points to 2.9 per cent.

Valuation of Chinese insurers is at a historic low and is likely to be revalued by the market, Citigroup wrote in a November report.

Signs of higher inflation in China and a potential US interest rate increase will push up China’s domestic bond yields and improve the investment return of insurers, it said.

However, there are few fundamentals to support further upside of A shares this year, Sinolink Securities analyst Li Lifeng said.

“Although the A-share market won’t be largely affected by the US presidential election short term, investors may turn cautious when the benchmark breaks the 3,200 threshold,” Li said.

Accelerated approval of A-share listing by mainland regulators and lingering uncertainties such as Italy’s referendum on constitutional reform on December 4, do not support a further gain, he said.

The China Securities Regulatory Commission on Friday approved 14 initial public offerings which will raise up to 6.4 billion yuan, the third batch within this month.

In other Hong Kong action, Macau casino operator Sands China rose 3.25 per cent to HK$38.15, while Galaxy Entertainment rose 1.67 per cent to HK$36.55. Trading turnover on the main board rose 14 per cent to HK$63.62 billion.

The Shenzhen Composite Index gained 0.1 per cent to 10,899.92, while the Nasdaq-like ChiNext fell 0.25 per cent to 2,152.6.

Glass producer CSG Holding Co shares were limit-up 10 per cent to 15.32 yuan in Shenzhen, as controlling investor insurance Baoneng Group forced its senior management to resign.