HONG KONG, Aug 1:
China shares rose on Wednesday, outperforming Asian peers, boosted by hopes of policy easing and a statement by the country’s securities regulator encouraging companies with strong capital to buy back shares.
The comment from the China Securities Regulatory Commission, first reported by the official Xinhua news agency late on Tuesday, mark Beijing’s latest effort at boosting investor confidence as mainland markets hover near more than three-year lows.
Expectations of more policy fine-tuning in the second half to support economic growth also underpinned gains, after Premier Wen Jiabao was reported on Tuesday by official media to have reiterated Beijing’s intention to stablize growth.
The Shanghai Composite Index rose 0.9 percent at midday, bouncing from a near 41-month low. The CSI300 Index of the largest Shanghai and Shenzhen listings gained 1.2 percent.
The China Enterprises Index of the top Chinese listings in Hong Kong climbed 0.7 percent, while the Hang Seng Index finished flat to remain above its 200-day moving average, a technical level it has struggled with since mid-May.
Wen’s comments came ahead of two surveys on Wednesday that continued to show sluggish pace of factory activity growth in July in the world’s second-largest economy.
‘It’s all about sentiment today. We’ve seen the same show from CSRC before, but companies make the decision to buyback shares, not the regulator,’ said Hong Hao, Hong Kong-based chief equity strategist with Bank of Communications International Securities.
‘I think we need to be careful about our expectations since the wording on growth is ‘stablize’ and not ‘stimulate.’ Besides, Beijing hasn’t quite followed through so far after saying so much except on property,’ Hong added.
Volumes in both markets at midday picked up, reaching the highest in more than a week.
WHEN WEN WAXES, MARKETS MOVE
Topping the climb in mainland Chinese indices on Wednesday were the more growth-sensitive names. PetroChina Co Ltd rose 0.6 percent, while the top mainland producer China Shenhua Energy Co Ltd gained 0.8 percent.
The railway and cement sectors were also strong. China Railway Construction jumped 3.2 percent in Shanghai and 2.8 percent in Hong Kong. Anhui Conch Cement rose 3.7 percent in Shanghai and 2.9 percent in Hong Kong.
Huaneng Power rose 0.9 percent in Hong Kong and 2.4 percent in Shanghai after posting better-than-expected first half net profit after markets closed on Tuesday.
Prior to Wednesday, Huaneng Power was trading at 10.6 times forward 12-month earnings in Hong Kong, a 17 percent discount to its historic median, according to Thomson Reuters StarMine. It is currently up 37.5 percent in 2012 to date in Hong Kong.
By comparison, the Hang Seng Index is up 7.4 percent this year to date, while the China Enterprises Index is down 1.9 percEnt.
Standard Chartered PLC slipped 0.8 percent ahead of its interim earnings at midday. The Asia-focused bank reported its slowest first-half pretax profit growth in a decade. Ent.
Up 6.8 percent in July and 5.9 percent in the year so far, it was trading before Wednesday at 10.1 times forward 12-month earnings, almost on par with its historical median, according to StarMine.
(agencies)
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