China stocks rise most in month amid merger talk
CHINA’S stocks rallied for their biggest gain in a month amid speculation the government will accelerate mergers of state-owned enterprises (SOEs) to bolster economic growth.
The Shanghai composite index jumped 4.9 percent yesterday led by industrial, energy and telecoms companies.
China Shipbuilding Industry, China Coal Energy and China United Network Communications all surged by the 10 percent daily limit. China is considering combining China Shipping Group and Cosco Group, its two major shipping companies, according to people familiar with the matter.
The nation’s cabinet had approved plans to overhaul SOEs to boost the economy, the South China Morning Post reported.
Data over the weekend showed producer prices fell last month to the lowest level since 2009 and exports declined more than expected.
“SOE mergers are an investment theme that’s quite certain and there are signs that the move will speed up,” said Shanghai Zhaoyi Asset Management general manager Li Jingyuan, who is adding to his stock holdings. “SOE reforms can drive the market higher.”
Stocks rebound
The Shanghai gauge has rebounded 12 percent since last month’s low as authorities took unprecedented measures to shore up markets, including banning stake disposals by major shareholders, suspending initial public offerings and compelling state-run institutions to support the market with equity purchases.
The CSI 300 index rose 4.5 percent. The Hang Seng China enterprises index of mainland shares traded in Hong Kong added 0.6 percent, while the Hang Seng index fell 0.1 percent. Trading volumes in Shanghai were 8.2 percent lower than the 30-day average.
The shake-up would likely result in two new companies similar to Temasek Holdings, Singapore’s state-owned investment company, which would channel funds to SOEs and pressure them to turn a profit, the South China Morning Post reported, citing unidentified sources close to the decisionmaking process. The Stateowned Assets Supervision and Administration Commission would no longer directly intervene in the running of most SOEs, the paper said.
The listed units of China Shipping Group and Cosco Group, including China Shipping Development and China Cosco Holdings, were suspended from trading yesterday.