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Shanghai shares up 0.91% despite weaker PMI data
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SHANGHAI stocks advanced today as property developers and financial firms gained after the government allowed blue-chip companies to issue preferred shares, even though data showed China’s manufacturing activity expanded at the slowest pace in eight months.
The key Shanghai Composite Index added 0.91 percent, or 18.66 points, to 2,066.28. Daily turnover was 110.2 billion yuan (US$17.8 billion).
The China Securities Regulatory Commission last week unveiled rules for the trial issue of preferred shares, allowing 50 blue-chip stocks on the Shanghai Stock Exchange to raise funds by selling preferred shares.
Other listed companies are also allowed to issue preferred shares if the proceeds are used to pay for acquisitions and buyback, the CSRC said after the market closed on Friday.
Analysts said the new funding vehicle will benefit lenders that are in need of capital replenishment and debt-ridden sectors such as housing and materials.
“Preferred stocks offer an attractive funding channel for the real estate sector that is facing rising funding costs,” Tian Shixin, analyst with BOC International, said in a note today.
Tian said selling preferred shares will enable the real estate sector to lower its debt ratio, as high as 76 percent by the end of last September.
The trial issue of preferred shares gave another boost to the property sector which felt relieved after two listed homebuilders were given approval to refinance through private placement, a sign that the securities regulator may have lift a four-year ban on the listing and refinancing by property developers.
Poly Real Estate gained 3.5 percent to 7.45 yuan. China Fortune Land Co Ltd surged by the daily limit of 10 percent to 28.35 yuan. Gemdale Corp added 1.2 percent to 6.67 yuan.
Financial shares also advanced. Huarong Securities said the issue of preferred shares will boost the funding capability and profitability of lenders and brokerages.
Industrial Bank Co gained 1.1 percent to 9.58 yuan. Sinolink Securities increased 6.1 percent to 22.10 yuan.
The market rebound, however, was restrained by the latest flash HSBC China Purchasing Managers' Index, which dipped five months on end to 48.1 in March, down from February’s final reading of 48.5. A reading below the 50 indicates contraction.
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