China’s Shanghai Composite Index yesterday surpassed 3,000 for the first time in three years and a gauge of the nation’s biggest companies capped a record winning streak on optimism shares would extend their world-beating rally.
Citic Securities Co (中信證券) and Haitong Securities Co (海通證券), the nation’s biggest securities firms, jumped 10 percent, adding to gains of at least 75 percent over the past month. Ping An Insurance Group Co (中國平安保險集團) surged 9.6 percent. Sany Heavy Industry Co (三 一) rose the most in a decade. PetroChina Co (中石油) added 2 percent.
The Shanghai Composite climbed 2.8 percent to 3,020.26 at the close yesterday, the highest level since April 2011. The CSI 300 Index jumped 4.1 percent, extending gains to 28 percent during the 12-day advance.
While China’s securities regulator is urging investors to be cautious on investing in stocks after the recent rally, ABN Amro Private Banking head of Asian equity research Daphne Roth said equities have further room to gain as valuations remain cheap and the government might loosen monetary policy to support the economy. ABN Amro oversees about US$230 billion.
“There’s a lot of buying from retail investors,” Roth said. “Short term, if I look at the technicals, it’s still powering ahead. I expect it to rise for the rest of the year. For the mid-to-long term, we are still positive.”
The Shanghai Composite’s 24 percent rally over the past month, the most among 93 global indices tracked by Bloomberg, is spurring investors to open share accounts at the fastest pace in three years and boosting turnover to record highs.
The value of shares that changed hands on the Shanghai and Shenzhen stock exchanges surged to 960 billion yuan (US$156 billion), approaching the 1.05 trillion yuan record it reached on Dec. 5.
The Hang Seng China Enterprises Index rose 2.4 percent to the highest level since February last year. The Hang Seng Index climbed 0.2 percent. Trading in Chinese stocks remains volatile after the Shanghai index posted the biggest price swings in four years on Wednesday last week.
The index’s 30-day volatility surged to a 13-month high, while trading volumes were 85 percent above the 30-day average, according to data compiled by Bloomberg.
The CSI 300 jumped 11 percent last week, while the Shanghai index climbed 9.5 percent, the most since 2009, amid speculation the government is set to lower interest rates or lenders’ reserve requirement ratios to support economic growth.
Gauges of financial and industrial shares in the CSI 300 climbed at least 5.1 percent. GF Securities Co and Founder Securities Co both jumped 10 percent. Brokerages’ valuations have surged to their highest level in more than four years as Shanghai’s surging stock market improves the prospects for trading revenue.
“The surging trading volumes will almost all translate into profit [for brokerages],” Capital Securities Corp (群益證券) Shanghai-based analyst Zheng Chunming (鄭春明) said.
Citic Securities and Haitong Securities were also the two biggest gainers in Hong Kong, rallying at least 13 percent. Brokerages are set for a “sweet spot” on a pilot stock options trading program, according to Goldman Sachs Group Inc.
The program might boost investor appetite for large-cap stocks, including financials, Goldman Sachs said.
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