China stocks bounce back to one-month high, investors await GDP data, final US debate

Focus shift to China’s crucial economic figures and the third US presidential debate tomorrow

PUBLISHED : Tuesday, 18 October, 2016, 9:07am
UPDATED : Tuesday, 18 October, 2016, 10:57pm

Chinese stocks bounced back on Tuesday to close at the highest level in more than month, led by a strong advance in construction and engineering shares. However, volumes only increased slightly, as investors awaited a barrage of third-quarter economic data from China and the third and final US presidential debate due Wednesday.

Mainland China’s benchmark Shanghai Composite Index rose 1.4 per cent or 42.71 points to 3,083.88, the best settlement since early September. In the previous day, the index dropped suddenly in the afternoon to close 0.7 per cent lower, triggered by a 6.2 per cent plunge in the US dollar-denominated Shanghai Stock Exchange B share index, as investors fear a further sharp decline in the yuan after recent turmoil in the exchange rate.

On Tuesday, the Shanghai Stock Exchange B Share Index also recouped some previous losses and advanced 2.6 per cent or 8.554 to end at 344.235. The gains came after the People’s Bank of China raised the yuan’s mid-point rate to 6.7303 per US dollar on Tuesday, stronger by 76 basis points from the previous fix.

Among other major stock indexes, the large-cap CSI 300 Index rose 1.3 per cent or 43.45 points to 3,321.33. The Shenzhen Component Index finished up 1.4 per cent or 145.52 points at 10,797.02. The Shenzhen Composite Index gained 1.4 per cent or 29.03 points to 2,056.59. The startup board ChiNext Index closed 1.4 per cent or 30.28 points higher at 2,198.14.

Despite the gains, combined turnover for Shanghai and Shenzhen markets only slightly increased to 483 billion yuan from Monday’s 465 billion yuan.

“The yuan’s continued fall has weighed recently on the stock market sentiment, plus the uncertainty from the US presidential election and a highly-anticipated rate-increase cycle after the election,” said Li Ning, an analyst for Victory Securities.

Traders have turned “cautious” before tomorrow’s data release, as China is due to unveil a raft of important economic indicators for the third quarter, including GDP, industrial production and retail sales, he said.

Besides, later on Wednesday, the third and final US presidential debate between Democratic nominee Hillary Clinton and GOP nominee Donald Trump will take place in Las Vegas at 9 pm Eastern time.

The consensus is China’s economic growth has remained roughly unchanged at 6.7 per cent in the third quarter, thanks to “easy money policy and massive infrastructure builds”, said Stephen Innes, a senior currency trader at Oanda Pacific.

Led the way on mainland markets were construction and engineering shares, after state media reported that China has speeded up state spending in the infrastructure sector, with the nation’s top economic planner having approved more than 200 billion yuan worth of railroad construction projects in the first half of this month.

China Railway Group spiked 8.5 per cent to 8.64 yuan, China Communications Construction soared 7.3 per cent to 13.12 yuan, and China Railway Construction surged 5.8 per cent to 10.3 yuan.

In Hong Kong, the Hang Seng Index also recovered after previous losses and ended up 1.6 per cent or 356.85 points at 23,394.39. The Hang Seng China Enterprises Index gained 1.9 per cent or 179.12 points at 9,720.20.

Turnover also remained light, with a total of HK$60 billion worth of shares changed hands, compared with HK$54 billion on Monday.

Macau casinos regained some ground after Monday’s steep losses, with Galaxy Entertainment up 2.7 per cent to HK$30.1 and Sands China rising 0.9 per cent to HK$34.15. Macau said earlier in the day that casino gross gaming revenues increased in the third quarter to 55.2 billion Macau pacata.