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Thursday, Dec 03, 2020

China’s stocks climb most in two weeks in rotation to large caps; Hong Kong shares narrow losses

China’s stocks climb most in two weeks in rotation to large caps; Hong Kong shares narrow losses

Economic recovery optimism buoys up the old-economy stocks, boosting materials and industrial companies. Property developers and casino operators decline in Hong Kong

China’s stocks rose the most in two weeks, rebounding from a weekly loss, on optimism that economic recovery in the Asian nation is gaining traction, boosting old-economy shares from commodity producers to industrial companies. Hong Kong’s benchmark trimmed losses.

The Shanghai Composite Index jumped 3.1 per cent, or 100.02 points, to 3,341.15 on Monday for the steepest gain since July 6.

The renewed momentum on Chinese stocks, which added US$1 trillion in market cap over the past three weeks in the world-beating rally, partially allayed concerns that the bull run was coming to an end. The benchmark tumbled 4.5 per cent on Thursday on angst that the run-up was too fast.

Rosy sentiment also buoyed up Hong Kong stocks, helping the Hang Seng Index to pare an intraday loss of as much as 1.3 per cent sparked by the resurgence of the coronavirus pandemic. The gauge closed 0.1 per cent lower at 25,057.99.

Monday’s mainland rally marked a shift in rotation to large-caps engaged in traditional industries from smaller companies that had led the gain on the broader market. The ChiNext index of growth stocks traded at the most expensive level relatively to the Shanghai Composite in six years this month on the price-to-earnings ratio basis, according to Bloomberg data.

“With the better growth recovery materialising, we see merit in adding sector leaders in the value camp that are exposed to cyclical growth upside,” said Wendy Liu, head of China strategy at UBS Group. “The big gap in valuation between growth and value, favourable liquidity and risk-on sentiment are also helping quality cyclicals.”

Gauges tracking material and industrial companies rallied at least 5.1 per cent, making them the best-performing sectors among all the industry groups. Aluminum Corp of China (Chalco) surged by the 10 per cent daily limit to 3.47 yuan and Anhui Conch Cement also rose by that much to 62.69 yuan. China Shipbuilding Industry jumped 10 per cent to 5.07 yuan.

Ping An Insurance advanced 6.1 per cent to 82.80 yuan and China Life Insurance climbed 10 per cent to 37.97 yuan after the regulator overseeing the industry raised the cap on how much insurers can invest in equities to 45 per cent of their assets from 30 per cent.

Cambricon Technologies, an artificial intelligence chip maker, jumped by 230 per cent from the initial public offering price to 212.40 yuan on its debut on Shanghai’s Start Market.

In Hong Kong, property developers and casino operators paced the decline after Hong Kong reported a record 108 new coronavirus cases on Sunday, prompting new social distancing orders from the government. Wharf Real Estate Investment declined 5.9 per cent to HK$30.50 and Galaxy Entertainment Group sank 3.9 per cent to HK$52.65.

Semiconductor Manufacturing International Corp slid 2.8 per cent to HK$28.20, extending a weekly loss of 30 per cent after China’s biggest chip maker started to trade in Shanghai’s new technology board, the Start Market, last Thursday.

Car Inc slumped 4.9 per cent to HK$2.93 before trading was suspended starting 1pm. SAIC Motor scrapped a plan to buy 613 million shares of the company through its Hong Kong unit, the Chinese carmaker said, citing disagreement on acquisition terms during an unspecified period.

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