Shares in China climbed yesterday, with a gauge of smaller companies capping its biggest advance in more than six years, as hundreds of stocks resumed trading and export data exceeded economists’ estimates.
The Shanghai Composite Index rose 2.4 percent to 3,970.39 at the close. The small-cap CSI 500 Index rallied 6.2 percent for its best gain since November 2008. The number of halted companies fell by 408 from Friday to 1,045, or 36 percent of overall listings on Chinese exchanges.
“Bargain hunters are focusing on small caps that were hit the most during the market rout,” said Dai Ming, a fund manager at Hengsheng Asset Management Co in Shanghai. “The market doesn’t have too much interest in big companies. They were the outperformers in the market plunge.”
Photo: Reuters
The Shanghai gauge has rebounded 13 percent in three days after unprecedented government intervention to end a rout which wiped almost US$4 trillion of the value of shares.
Officials last week banned major shareholders from selling shares for six months, ordered state companies to buy equities and allowed more than half of listed firms to suspend trading.
The public security bureau is investigating the plunge and has found signs of stock market manipulation, Xinhua news agency reported over the weekend.
The CSI 300 Index gained 2.6 percent at the close. The ChiNext index of smaller companies jumped 5.8 percent. Hong Kong’s Hang Seng China Enterprises Index and Hang Seng Index both added 1.2 percent.
Margin traders increased holdings of shares purchased with borrowed money for the first time in 15 days on the Shanghai Stock Exchange on Friday last week. The outstanding balance of margin debt on the nation’s two bourses dropped by US$133.9 billion from the peak on Wednesday to US$231.2 billion through Thursday last week.
Most of speculative margin financing has largely been wiped out in the Chinese market correction, Hong Kong-based CLSA Ltd strategist Francis Cheung (鄭名凱) said at a briefing in Hong Kong yesterday.
The “worst is over for now” for equities, he said.
Police have found signs that some firms had manipulated the trading of futures, Xinhua reported on Sunday, without saying where it got the information.
A team of investigators led by Chinese Vice Minister of Public Security Meng Qing-feng (孟慶豐) is continuing the probes after arriving in Shanghai on Friday last week, Xinhua reported.
Foreigners sold a net 40.4 billion yuan (US$6.5 billion) of shares via the Hong Kong and Shanghai exchange link in the five days through yesterday, according to data compiled by Bloomberg.
BlackRock Inc, UBS Group AG and Templeton Emerging Markets Group’s Mark Mobius said Chinese stocks need to fall further before they are worth buying.
Even after the market sell-off, the Shanghai Composite is 94 percent higher than it was 12 months ago. The gauge’s valuation is 50 percent above its five-year average, while the median price-to-earnings ratio on Chinese bourses is the most expensive among the world’s 10 largest markets.
“Valuations are still about double where they were last summer,” Russ Koesterich, the global chief investment strategist at BlackRock, which oversees about US$4.8 trillion, said in an interview on Friday last week on Bloomberg Television. “Given the magnitude of the run-up, it is possible that even after a 30 percent correction we haven’t gotten back to something approaching fair value.”
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