China blue chips power ahead as resource shares surge; HK to rise for 8th day

SHANGHAI/HONG KONG, July 19 (Reuters) – China stocks rose on
Wednesday as investors piled into banking, consumer and
resources shares after robust economic growth data earlier in
the week and on expectations that Beijing is stepping up efforts
to reform lumbering and inefficient state companies.

Even badly bruised small caps shrugged off early weakness to
end the morning higher, though traders were not sure if their
recent sharp correction has ended.

The blue-chip CSI300 index rose 1.1 percent to
3,707.23 points by the lunch break, while the Shanghai Composite
Index gained 0.8 percent to 3,213.09.

Start-up board ChiNext was in negative territory
for most of the morning but managed to end the morning up 0.4
percent. Still, the gauge remained near the lowest level since
January, 2015.

The index, long dominated by speculators, plunged early in
the week in what media dubbed “Black Monday after President Xi
Jinping vowed to strengthen control over financial risk.

“Blue-chips are powering ahead but ChiNext is in the abyss.
Such divergent trends will be self-reinforced, and will last for
at least a year,” said Chang Chenwei, trader of a Shanghai-based
hedge fund house.

State-owned firms in particular were advancing on expections
of further reforms, he added. Earnings of steel and coal firms,
for example, have benefited from government-orchestrated
shutdowns of older, more inefficient plants and mines.

The latest semi-annual reports from Chinese mutual fund
houses show that institutional investors are increasingly buying
into blue chips, with asset managers targeting market leaders in
sectors such as banking, insurance, home appliances and
automobiles.

Foreign investors are also plowing money into China’s
big-caps, with the CSOP FTSE A50, the biggest
yuan-denominated China-focused exchange-traded fund in Hong
Kong, seeing money inflows recently.

“We believe China big-cap A stocks are still the first stop
for global investors who look to get access in China especially
after MSCI’s decision to include China A shares into its global
index framework starting from 2018,” fund manager CSOP Asset
Management wrote.

Most sectors rose in China, led by financials and raw
material shares, with big players in the sector all state-owned.

An index trading coal producers jumped 3.4
percent, while non-ferrous metal shares rose 2.8 percent

HONG KONG

Hong Kong’s benchmark Hang Seng Index was on track
for an eighth straight day of gains, rising 0.5 percent to
26,652.10 by midday.

The benchmark, which saw its best week in a year in the
previous week, has added 5 percent so far in the current rally.

“We see that in the second quarter, the Chinese economy is
quite steady or maybe even a little better that expected, and
the liquidity keeps going to Hong Kong because of still
relatively low variation,” said Steve Leung, director at UOB Kay
Hian Holdings.

“Also the market is expecting that during first half of
earnings season, there will be a lot of upside re-ratings.”

The day’s gains were concentrated in technology stock
Tencent Holdings and telco China Mobile,
whose 2 percent and 0.5 percent ascent, respectively, pushed up
their sectors.

Energy shares were buoyed by oil and gas major Sinopec
and coal giant China Shenhua, which added
1.2 percent and 3.2 percent, respectively.

The Hang Seng China Enterprises Index, which tracks
the performance of China companies listed in Hong Kong, rose as
much as 1.1 percent to 10,875.70, its highest level since
October, 2015.

(Reporting by Samuel Shen and Rushil Dutta; Editing by Kim
Coghill)


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