Merger speculation lifts share prices
Print Edition
CHINA stocks jumped more than 4 percent yesterday on possible restructuring among major shipping firms and in other key sectors, and on hopes that less volatile trading may soon convince fund managers to get off the sidelines and re-invest billions in cash.
The benchmark Shanghai Composite Index jumped 4.92 percent to close at 3,928.41 points, while the smaller Shenzhen Component Index gained 4.31 percent to close at 13,302.96.
Total turnover of the two exchanges expanded to 1.23 trillion yuan (US$198 billion), compared to the previous trading day’s 894.3 billion yuan.
According to media reports yesterday, the government has approved an ambitious plan to reorganize state-owned enterprises to improve their competitiveness in an increasingly liberalized market.
Listed companies of leading state-run giants rallied, with 19 firms rising by the 10-percent daily limit and many others rising sharply. Shanghai Electric Power Co closed 8.6 percent higher compared to last Friday.
The good news even offset the impact from lackluster foreign trade figures that were released over the weekend. It showed that China’s exports declined 8.9 percent and imports fell 8.6 percent year on year in July.
Across the two bourses, shares of more than 300 companies soared by 10 percent. Winners outnumbered losers by 932 to two in Shanghai and by 1,329 to four in Shenzhen.
Investors focused on sector-specific news and brushed off gloomy China data at the weekend on trade and inflation, which reinforced expectations the government will need to roll out more support measures for the economy.
“China’s economic indicators are not very good which means monetary policy will continue to be accommodative,” said Du Changchun, an analyst at Northeast Securities in Shanghai.
“Investors are also betting that SOE reforms will inject life into the market. Trading volumes in the stock market today picked up which is a good sign to show that funds are flowing into the market,” Du said.
Shipping, railway and cement counters all saw strong buying on expectations of policy support and sector reforms, analysts said.
Trading in some major shipping stocks, including China Shipping Development, China Shipping Container Lines and China COSCO Holdings, was suspended yesterday pending announcements, adding to speculation they may be merged.
The CSI 300 infrastructure index surged more than 6 percent, CSI energy index climbed 5.4 percent while the real estate index rose 4.6 percent.
China is banking on increased infrastructure spending to support the economy in the second half of the year, while its top economic planning body said yesterday that the property market was likely to continue to improve in the second half of the year.
Close to 300 China funds that oversee more than 1 trillion yuan are sitting on the sidelines with “ammunition” to enter the stock markets at any time, the Shanghai Securities News said on Friday.
In recent weeks, the government has rolled out an unprecedented series of support measures to prevent a full-blown market crash, including cajoling Chinese brokerages and pension funds to buy stocks and cracking down on short-selling.
Stocks tumbled as much as 30 percent at one point on panic selling, but have started moderating in recent weeks.
Goldman Sachs analysts estimate that the “national team” has potentially spent 860-900 billion yuan to support the stock market in June-July and the potential aggregate size of market-support funds is probably around 2 trillion yuan.
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