China stocks rally to 7-month high

China Daily (USA) - - FRONT PAGE - By CAI XIAO caix­iao@chi­nadaily.com.cn

Chi­nese stocks climbed to a seven-month high on Mon­day amid op­ti­mism about the up­com­ing Shen­zhen-Hong Kong Stock Con­nect and spec­u­la­tion about prop­erty merger and ac­qui­si­tion ac­tiv­ity.

The Shang­hai Com­pos­ite In­dex surged by as much as 2.44 per­cent, clos­ing at 3,125.2 points, led by fi­nan­cial com­pa­nies and prop­erty de­vel­op­ers. Nine real es­tate com­pa­nies, in­clud­ing China Vanke Co, Lang­fang De­vel­op­ment Co and Huafa In­dus­trial Co, climbed by the daily limit as the top per­form­ers in the mar­ket.

The Shen­zhen Com­po­nent In­dex rose by 2.79 per­cent, while the ChiNext startup in­dex climbed by 3.27 per­cent.

“The up­com­ing Shen­zhen-Hong Kong Stock Con­nect might be the big­gest news in the mar­ket, which ex­plains to­day’s strong per­for­mance ,” said Hong Hao, chief strate­gist at BOCOM In­ter­na­tional Hold­ings Co.

Hong said there are many tech­nol­ogy com­pa­nies listed in Shen­zhen, and they will be at­trac­tive to in­vestors in Hong Kong when the stock con­nect is launched.

The China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion said on Fri­day that se­cu­ri­ties reg­u­la­tors of the Chi­nese main­land and Hong Kong are work­ing closely with the Shen­zhen Stock Ex­change and Hong Kong Ex­changes and Clear­ing Ltd for the launch of the long-an­tic­i­pated stock con­nect pro­gram.

The stock con­nect is a cross­bor­der in­vest­ment pro­gram mod­eled after the Shang­hai-Hong Kong Stock Con­nect, which was launched in Novem­ber 2014 so main­land in­vestors could buy Hong Kong stocks, and vice versa.

Mean­while, Dong Dengxin, a fi­nance pro­fes­sor at Wuhan Univer­sity of Sci­ence and Tech­nol­ogy, said the stock mar­ket climbed on Mon­day as China Ever­grande Group fu­eled op­ti­mism that the pace of merger and ac­qui­si­tion ac­tiv­i­ties in the prop­erty in­dus­try will ac­cel­er­ate.

Ever­grande, which boosted its stake in Lang­fang to 15 per­cent in the past four months, plans to fur­ther in­crease its hold­ings and hasn’t ex­cluded the pos­si­bil­ity of ob­tain­ing con­trol of the com­pany, Lang­fang said on Au­gust 10.

Ever­grande bought a 5 per­cent stake in Vanke , the na­tion’s largest res­i­den­tial de­vel­oper, ear­lier this month.

Hong said the val­u­a­tion of real es­tate com­pa­nies such as Vanke and Lang­fang is com­par­a­tively low, so more merg­ers and ac­qui­si­tions might be un­der­taken.

China stocks ral­lied on Mon­day as in­vestors bet that dis­ap­point­ing eco­nomic data for July would prod Bei­jing to un­leash fresh stim­u­lus mea­sures, Reuters said.

But Hong said the cen­tral gov­ern­ment is un­likely to carry out stim­u­la­tive mea­sures, since the mar­ket was not short of money and Chi­nese lead­ers have pledged to curb as­set bub­bles.

Dong said the Shang­hai Com­pos­ite In­dex of 3,125.2 points was sen­si­tive, as many in­vestors who suf­fered from the stock slump last year would sell their shares at that level.

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