Chinese stocks rise to almost two-year high on expectations foreign investors will increase stakes after scrapping of foreign-ownership cap

Trading values on mainland exchanges reach 2-month high of US$89.7b. In Hong Kong gamers accessories firm Razer jumps 18pc on debut. Hang Seng continues rising, now at highest since December 2007

PUBLISHED : Monday, 13 November, 2017, 9:27am
UPDATED : Monday, 13 November, 2017, 10:40pm

Chinese stocks rose to an almost two-year high, as smaller banks advanced on expectations foreign investors will increase stakes following the easing of foreign ownership of the industry and steelmakers gained on optimism about improving profitability.

The Shanghai Composite Index added 0.4 per cent, or 15.16 points, to 3,447.84 at the close, the highest level since December 31, 2015. The CSI 300 Index of big-cap shares also climbed 0.4 per cent and the ChiNext gauge of smaller firms added 0.3 per cent. Hong Kong’s benchmark stock gauge held onto its highest level in almost a decade.

Combined trading values on mainland’s Shanghai and Shenzhen exchanges reached a two-month high of 595.8 billion yuan (US$89.7 billion), according to data compiled by Bloomberg.

We are still optimistic about the market outlook, because of industry upgrade and consolidation as well as speed-up in companies’ internationalisation
Xun Yugen, a strategist at Haitong Securities in Shanghai

China’s so-called old-economy stocks, or companies in traditional industries, have regained favour among investors this year, as policymakers deepen reforms to boost efficiency through dismantling sector barriers and cutting unneeded capacity.

Bigger and state-owned companies have led an 11 per cent gain on the Shanghai Composite so far in 2017.

“We are still optimistic about market outlook, because of industry upgrade and consolidation as well as speed-up in companies’ internationalisation,” said Xun Yugen, a strategist at Haitong Securities in Shanghai.

Wujiang Rural Commercial Bank surged by the 10 per cent daily limit to 10.63 yuan in Shanghai. Wuxi Rural Commercial Bank climbed 4.9 per cent to 8.79 yuan and Jiangsu Jiangyi Rural Commercial bank rose 3.7 per cent to 9.04 yuan. Big rivals China Construction Banks and Bank of China gained no more than 0.6 per cent.

China’s decision on Friday to scrap limits on foreign ownership of the nation’s banking industry will make it possible for overseas investors to target small lenders for acquisitions and become their biggest shareholders, though gaining a controlling stake in big, state-owned peers still remains difficult, according to Citic Securities.

Steelmakers climbed after China Merchants Securities said gross profits generated from per ton of major steel products will continue to set new highs as inventories fell for a fifth straight week.

Fangda Special Steel Technology soared 10 per cent to 14.73 yuan and Nanjing Iron & Steel climbed 5.9 per cent to 5.20 yuan. Lingyuan Iron & Steel added 5.8 per cent to 6.24 yuan.

In Hong Kong, the Hang Seng Index rose 0.2 per cent, or 61.26 points, to 29,182.18, the highest close since December 2007. The Hang Seng China Enterprises Index, or the H-share gauge, dropped 0.5 per cent after rising to a two-year high on Friday.

Razer, a maker of computer accessories for gamers backed by Intel and Hong Kong’s wealthiest businessman Li Ka-shing, jumped 18 per cent to HK$4.58 from the initial public offering price on the first day of trading. Yixin Group, a Chinese online car-sales platform backed by Tencent Holdings, is expected to debut on Thursday.

“The stock market is being supported by big IPOs this week, and by the fact A shares remain in positive territory,” said Louis Tse Ming-kwong, a director of VC Brokerage in Hong Kong. “The strategy of brokers would be to avoid shorting the market ahead of the Christmas holidays.”

Apple supplier AAC Technologies closed at its record high for a sixth consecutive day, jumping 5.8 per cent to HK$179.20. A number of analysts raised the price target in light of its earnings report.

Property developer Country Garden rose 5.7 per cent to HK$12.98 and Sunny Optical Technology Group, a smartphone lens maker, advanced 6 per cent to HK$149 on announcement that the two companies will be included as components in the Hang Seng Index.