China Stocks Jump on Hopes Xi Will Announce Reforms in Shenzhen
(Bloomberg) - China's stocks climbed bullishly before President Xi Jinping addressed the southern city of Shenzhen this week.
The Hang Seng China Enterprises Index rose 2.7% at close of trading, the fastest since July 6. The Xiaomi Corp. gained 8.4% to generate profit, while Industrial & Commercial Bank of China Ltd. recorded the largest increase in three years. The CSI 300 index rose 3% as it neared a five-year high.
Xi is expected to support plans to turn southern China into a global technology hub during the trip. The official Xinhua news agency announced that it will hold an address on Wednesday. China will bring the cooperation between Shenzhen and Hong Kong to a "higher level", Xinhua previously reported, without giving further details.
"Investors are optimistic about further reforms and upgrades for Shenzhen, which are expected to encourage foreign capital inflows and improve the technology sector," said Patrick Shum, director of investment management at Tengard Holdings Ltd.
China has tried to better integrate Shenzhen, the surrounding province of Guangdong and the former colonies of Hong Kong and Macau into the so-called Greater Bay Area. Efforts are facing new challenges amid trade and security disputes with the US, concerns over Hong Kong's new security law and travel restrictions due to the virus pandemic.
Chinese stocks listed in Hong Kong lagged their mainland peers in 2020, with Hang Seng China value still falling 12%. The CSI 300 is up 18%, outperforming most of the world's major benchmarks. This past week's spread has pushed the premium of mainland stocks versus their Hong Kong-listed peers to its highest level since 2009.
Measurements for key stocks listed in Shanghai and Shenzhen have risen at least 2% in both sessions since a long vacation break earlier in the month. Optimism that a grand meeting of the ruling Communist Party slated for later this month will result in policies to stimulate demand, assuming stocks are boosted earlier.
Xiaomi's profit extended its progress to 111% this year. China Unicom Hong Kong Ltd. and China Telecom Corp. rose by at least 5.5% and were among the best performers on the Hang Seng China trail.
ICBC rose 5.7% in Hong Kong after trading at the largest discount on its Shanghai stocks since early 2018. Mainland stocks only gained 1%. The gains could point to a sustained uptrend in Hong Kong stocks as mainland capital flows into Chinese banks in bulk. Mainland investors bought the city's shares for HKD 7.5 billion ($ 963 million) on Monday, most in three months. ICBC is the biggest drag on Hang Seng China measure this year.
"The AH premium is at its highest level in years and the banking sector has had the biggest discount," said Alvin Ngan, an analyst at Zhongtai Financial International Ltd. "The H shares of Chinese banks are just waiting for a catalyst to close the premium." Gap to their counterparts on the mainland. "
The shares of companies based in Shenzhen, which has grown from a fishing village to a metropolis of more than 13 million people over the past four decades, also rose on Monday. Software maker Shenzhen Forms Syntron Information Co. grew 20% per day and Shenzhen Airport Co. rose 5.4%.
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