China’s stocks rebounded from the biggest two-day loss in 18 months yesterday as construction and bank shares gained after the Chinese government pledged to support machinery exports and on speculation the government is taking steps to boost lending.
Sany Heavy Industry Co (3一重工) and Zoomlion Heavy Industry Science and Technology Co (中聯重工科技) both rallied 10 percent. The Chinese State Council pledged to guarantee financing for exports of large equipment and encourage lending by commercial banks for equipment manufacturing. China Construction Bank Corp (中國建設銀行) led gains for lenders, rising 6.8 percent. China Business News reported that the Chinese central bank will not require banks to set aside reserves for deposits from non-bank financial institutions.
The Shanghai Composite Index surged 3.4 percent to 3,072.54 at the close, the biggest gain since Dec. 4. It had lost 5 percent over the previous two days on speculation the government would take action to cool rapid gains in equity prices. The CSI 300 Index advanced 3.3 percent.
“Some investors are bottom-fishing after the pretty big correction over the past few days,” said Wu Kan (吳侃), a fund manager at Dragon Life Insurance Co (正德人壽). “Machinery companies are the favorite ones for investors now as the government looks like it’s starting to implement specific policies for Chinese companies to go overseas.”
Hong Kong’s stock market was closed yesterday and today for the Christmas holidays. The Bloomberg China-US Equity Index, the measure of the most-traded US-listed Chinese companies, retreated 0.6 percent in New York on Wednesday.
Trading volumes in the Shanghai Composite were 10 percent below the 30-day average. The index has risen 45 percent this year on speculation the central bank will extend interest-rate cuts and as investors boosted stock purchases with borrowed money.
The Shanghai gauge is valued at 11.6 times 12-month projected earnings, near the highest level in three years.
The outstanding value of margin trading dropped for a second day to 667.2 billion yuan (US$107.3 billion) on the Shanghai Stock Exchange, according to the data from the bourse. It reached a record 670.6 billion yuan on Monday.
Gauges of financial and industrial stocks in the CSI 300 advanced at least 4.4 percent for the two biggest gains among 10 industry groups. Huaxia Bank Co (華夏銀行) jumped 10 percent and Bank of Ningbo Co (寧波銀行) surged 5.9 percent. Industrial & Commercial Bank of China Ltd (中國工商銀行) and Bank of China Ltd (中國銀行) gained at least 3 percent.
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