China stocks post best quarterly performance since end of 2015

Mainland China’s benchmark index posted the best quarterly performance since the end of 2015, as traders sought safe bets by buying consumer companies amid uncertainty about the economic outlook.

The Shanghai Composite Index closed at 3,348.94 on Friday, the last trading day of September. The gauge has advanced 4.9 per cent in the third quarter, the biggest gain since the three-month period ending in December 2015.The large-cap CSI 300 Index posted a quarterly rise of 4.6 per cent.

Hong Kong’s Hang Seng Index also jumped 7 per cent in the June-to-September period.

Investors will begin to gauge the strength of China’s economy, as the world’s second-largest economy is set to release key September and quarterly economic data starting Saturday with the official purchasing managers’ index on the manufacturing industry. Bloomberg surveys show the factory gauge may slip this month and China’s economic growth is likely to weaken this quarter.

“The market is turning a bit defensive now as there is concern that economic growth will weaken for the rest of the year,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai. “Apparently, consumer stocks are investors’ top choices in that scenario.”

Consumer companies advanced. Inner Mongolia Yili Industrial, the nation’s biggest dairy maker, surged 4.2 per cent to 27.5 yuan. Yonghui Superstores, a supermarket operator, gained 2.7 per cent to 8 yuan. Henan Shuanghui Investment&Development, China’s larger pork processor, added 0.3 per cent to 24.9 yuan.

Haitong Securities, which was ranked No 1 for equity strategy research by New Fortune magazine last year, says investors should buy consumer stocks in the coming quarter, as a hedge against the risk of a slowdown in China’s economic growth in the fourth quarter.

Expansion of China’s manufacturing industry may slow as the factory gauge, which is compiled by the statistics bureau, may drop to 51.6 this month from 51.7 in August, according to the median estimate of 30 economists surveyed by Bloomberg. A reading above 50 indicates expansion.

China’s economic expansion may slow to 6.7 per cent this quarter from 6.9 per cent a quarter earlier, according to the median projection of 34 financial institutions in Bloomberg survey.

Commodity producers are the best performer for the quarter so far, with a gauge tracking the sector jumping 17 per cent in the period, as a cutback in excessive capacity and a rebound in economic growth boosted raw-material prices. Qinghai Salt Lake Industry and Aluminum Corp of China have surged more than 70 per cent over the past three months.

China’s markets will be shut next week for public holidays, while equity and futures trading in Hong Kong will be closed on October 2 and 5. Markets in China will reopen on October 9.

In Hong Kong, the Hang Seng Index rose 0.5 per cent on Friday to end at 27,554.3. The Hang Seng China Enterprise Index, or the H-share gauge, finished 0.3 per cent higher at 10,910.04.

Kunlun Energy jumped 5.1 per cent to HK$7.63 after the company signed an agreement to buy a 51 stake in a liquefied natural gas unit from PetroChina for 1.55 billion yuan (US$232.1 million).