BackMost Chinese stocks rise as ChiNext briefly gains 20% from low
The small-cap ChiNext index surged as much as 5.4%, extending gains from the 7 July low to 20%, as technology shares jumped
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Shanghai: Most Chinese stocks rose, led by a rally for smaller companies, as the nation’s broadest measure of new credit increased the most since January and hundreds of shares resumed trading.
About three stocks gained for each one that fell on the Shanghai Composite Index, which retreated 0.3% to 3,957.84 at the break. The small-cap ChiNext index surged as much as 5.4%, extending gains from the 7 July low to 20%, as technology shares jumped. The number of suspended companies in mainland exchanges fell to 27% of all listings, according to data compiled by Bloomberg.
“Funds are still flowing back to small caps to chase the new-economy theme," said Wei Wei, an analyst at Huaxi Securities Co. in Shanghai. “Small caps have fallen a lot from their highs but that may also indicate that decent investment opportunities have emerged from the rout."
The Shanghai gauge has rebounded 14% in the past four days, spurred by data showing the economy is stabilizing and speculation the government’s interventionist measures to end a rout that wiped almost $4 trillion of value are working. While the ChiNext’s 20% rebound from the lows would normally signal a bull market, about a third of shares are still suspended as the gauge’s 30-day volatility surged to a record high.
Policy makers have gone to unprecedented lengths to prop up stocks. They banned large shareholders from selling stakes, ordered state-run institutions to buy equities, allowed the central bank to finance stock purchases and let more than half of companies on mainland exchanges halt trading. The number of suspended companies in mainland exchanges fell to 785 from 1,045 on Monday morning, according to data compiled by Bloomberg.
Technology rally
The CSI 300 Index lost 0.9%. Hong Kong’s Hang Seng China Enterprises Index slid 1.5%, dragged down by auto companies, while the Hang Seng Index dropped 0.6%.
A measure of technology stocks in the CSI 300 gained 4.4%, the most among 10 industry groups. Tsinghua Tongfang Co., a provider of computer and software services controlled by Tsinghua University, surged by the 10% daily limit.
Tsinghua Unigroup Ltd, the investment arm of Tsinghua University, plans to offer $23 billion for chipmaker Micron Technology Inc., a person familiar with the matter said, in a deal that would be the largest takeover of a foreign firm by a Chinese company.
Margin rebound
Hundsun Technologies Inc., part-owned by Jack Ma’s Alibaba Group Holding Ltd, jumped 10% for a second day. The China Securities Regulatory Commission said late Monday it has sent an enforcement team to the company to check that it is following market rules. Hundsun denied suggestions that its HOMS system, which the company has developed to virtually facilitate non-brokerage margin lending, may have helped fuel the recent stock rout.
Margin traders increased holdings of shares purchased with borrowed money for a second day on Monday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising by 0.2% to 934.3 billion yuan ($150 billion).
Trading volumes on the Shanghai Composite were 9.1% higher than the 30-day average for this time of day. The index is valued at 15.5 times 12-month projected earnings, compared with the five-year average multiple of 10.3, according to data compiled by Bloomberg.
Aggregate financing, which includes bank loans and off- balance credit, was 1.86 trillion yuan, the People’s Bank of China said on Tuesday. That’s higher than all 23 estimates in a Bloomberg survey of economists. The data follow reports showing exports rising for the first time in four months in June and inflation accelerating from the previous month.
Economic data
The statistics bureau is due to release data on second- quarter economic growth on Wednesday. The expansion may have slowed to 6.8% from 7% in the first three months, according to the median estimate of a Bloomberg survey.
Data on industrial production, fixed-asset investment and retail sales for June are also due Wednesday. Industrial output probably rose 6 percent from a year earlier, slowing from a 6.1% gain in May, while retail sales may have gained 10.2%, according to Bloomberg surveys.
Large-cap stocks led declines in Shanghai as PetroChina Co. and Industrial and Commercial Bank of China Ltd slumped at least 3%. Citic Securities Co. paced losses for brokerages, sliding 3.5%. Guotai Junan Securities Co. slumped 4.8%. Bloomberg
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