China Stocks Rise Most in Seven Weeks on Government Support
Bloomberg News
China’s stocks rose the most in a month, led by commodity producers and financial companies, on speculation the government will take steps to bolster equities.
Citic Securities Co. (600030) and Haitong Securities Co., the largest-listed Chinese brokerages, advanced at least 3 percent in Hong Kong and Shanghai after the State Council said it will deepen reforms of the nation's capital markets. Yanzhou Coal Mining Co. (600188) surged 10 percent as a gauge of energy shares gained the most among industry groups. Jiangxi Copper Co. jumped 7.2 percent. The rally for energy and metal shares pared losses for the worst-performing industry groups in the past year.
The Shanghai Composite Index (SHCOMP) climbed 1.9 percent to 2,049.43 at the 11:30 a.m. break, heading for the biggest gain since April 8. While Chinese President Xi Jinping said the nation needs to adapt to a 'new normal' in the pace of economic growth, expectations are building among equity investors that the government will roll out market-boosting measures, according to Dragon Life Insurance Co. The benchmark index has rallied from levels near 2,000 at least twice this year as policy makers took steps to reduce money market rates and speed-up infrastructure spending.
'The announcement is good for the market in the medium and long term and raises the government's attention to the stock market to the state level,' said Wu Kan, a fund manager at Shanghai-based Dragon Life, which oversees about $3.3 billion. 'This will boost the confidence of the market.'
Brokerages Rally
The CSI 300 Index jumped 2.1 percent to 2,178.47. The Hang Seng China Enterprises Index (HSCEI) added 1.6 percent. Trading volumes in the Shanghai Composite were 33 percent above the 30-day average, according to data compiled by Bloomberg.
Policy makers are seeking to support the stock, bond and commodities markets as growth decelerates. The Shanghai Composite slid 0.8 percent last week for a fourth weekly loss on concern about the slowdown and the potential resumption of initial public offerings. The index has dropped 3.1 percent this year, taking valuations to 8 times 12-month projected earnings, compared with the five-year average multiple of 13.
Citic Securities rallied 4.4 percent in Shanghai and 5.5 percent in Hong Kong, halting a six-day slide. Haitong Securities gained 3.3 percent in Shanghai and 6.2 percent in Hong Kong.
'Our country's capital markets have developed very rapidly over the last 20 years, and we have nascent market systems to cover stocks, bonds and futures,' the State Council said in the statement. 'Our nation's capital markets are still immature and some organizational and systematic problems still exist.'
April Data
President Xi said China needs to remain 'cool-minded' amid a slowdown that analysts forecast will lead to the weakest expansion since 1990.
China's growth fundamentals haven't changed and the country is still in a 'significant period of strategic opportunity,' Xi said, according to a Xinhua News Agency report on the central government website on May 10.
The statistics bureau will release April data on industrial production, retail sales and fixed-asset investment tomorrow. Factory production probably expanded 8.9 percent, according to Bloomberg estimates, compared with 8.8 percent growth in the previous month. Official data released last week showed inflation eased while exports rebounded.
Measures of energy and material stocks in the CSI 300 jumped more than 4 percent today, the biggest gains among 10 industry groups. The material gauge has slumped 24 percent over the past year, while the energy measure plunged 31 percent.
Yanzhou Coal jumped 10 percent in Shanghai and 6.8 percent in Hong Kong. Jiangxi Copper rallied 7.2 percent. Jilin Ji En Nickel Industry Co. surged by the daily limit for a third day in Shanghai as nickel prices rose to a two-year high in London on concern about strained supplies.
IPO Outlook
Material and energy stocks are rising today on speculation they have been oversold and that will join the recent rally for nickel producers, Wang Zheng, chief investment officer at Jingxi Investment Management Co., said by phone today.
Conditions are basically mature for IPOs to restart as preparatory work has largely been done, according to China International Capital Corp. The IPO resumption should have negative impact on A-share liquidity, which has already been priced in, CICC analysts Hanfeng Wang and Qiusuo Li wrote in a report dated today.
About 557 companies are waiting for IPO approval as of May 9, of which 34 have obtained the green light, CICC said, The total size of all pending IPOs is at more than 380 billion yuan ($61 billion), it said.
The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, rose 0.3 percent in New York on May 9.
To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Allen Wan
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