China’s stock market advanced, led by telecommunications and financial companies, as the benchmark gauge moves on track to mark the best seven-day gain before the Lunar New Year holiday since 2007.
China United Network Communications Ltd. rose 3.8 percent, extending gains after rallying by the 10 percent daily limit on Monday, while Citic Securities Co. and Haitong Securities Co. made major contribution to the financial firms’ rally. Poly Real Estate Group Co. was up after data showed that the nation’s new home prices dropped in 64 cities last month, versus 65 in December.
The Shanghai Composite Index was moving upward, reaching 3,248.82 before the break. That helps accumulate over 5.5 percent gain in the past seven days. Trading activity was 25 percent below as compared to the 30-day average as the weeklong holiday starts tomorrow. The gauge leads major benchmark indexes as it soared 52 percent over the past 52 weeks amid speculation that spur program will stimulate growth in the world’s second-largest economy.
“The rally in the stock market is clearly a good sign for spending during the holiday,” said Zhang Dongyi, Guangzhou-based fund manager at Guangfa Fund Management Co. “We are optimistic about further performance in banks, real estate and insurance companies that could benefit from measures to support the economy.”
The People’s Bank of China injected a net 205 billion yuan ($32.8 billion) into the money market through open market operations last week, the largest not seen since January 2014. The move came after an across-the-board reduction in banks’ reserve requirements on Feb. 6 and the nation’s interest rate cut to 5.6 percent in November.
“Broader easing moves, such as the interest rate cut last November and the bank reserve ratio cut last week, will definitely repeat this year, together with other easing, such as that via open market operations,” said a trader at a Chinese commercial bank in Beijing.
China is scheduled to hold its National People’s Congress in the starting two weeks of coming month, when the government sets its growth target for the year.
A gauge of property stocks in the Shanghai index extended six-day winning streak, with Poly Real Estate making gains for a second day in three. After Shenzhen, Ganzhou came forward and reported increase in new home prices last month versus in December, according to data from the National Bureau of Statistics on Tuesday. However, the index dropped 5.1 per cent from a year ago, its worst rate of drop since 2011.
“Investors including myself are cautiously optimistic as there’s a deflationary risk in China and the PBOC is trying to improve the situation,” said Stephen Ma, Hong Kong-based head of greater China equities at LGM Investments. “We like selective sectors like uncrowded automobiles and high quality insurance names as a proxy to the rising stock market.”
