The Shanghai Composite Index rose for a second day as a rally by industrial companies on merger speculation overshadowed data showing a deepening economic slowdown. The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong slid 0.7 per cent.
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The Shanghai Composite Index climbed 1.2 per cent to 3,789.69 at 9.55 am.
China is planning to combine two major state-owned shipping companies – China Ocean Shipping (Group) Co., known as Cosco, and China Shipping (Group) Co. – or merge some of their businesses, Bloomberg News reported, quoting people familiar with the matter.
China’s leaders are under growing pressure to stimulate the economy further after producer prices in July hit their lowest point since late 2009 and exports tumbled 8.3 per cent in their biggest fall in four months.
“State-owned enterprise mergers are an investment theme that’s quite certain and there are signs that the move will speed up”, said Li Jingyuan, a general manager at Shanghai Zhaoyi Asset Management, who is adding to his stock holdings.
“The poor import-export data released over the weekend increased the likelihood of policy support…Investors seem to be taking the view that the data are weak enough to guarantee some type of policy response”, said Gerry Alfonso, a broker with Shenwan Hongyuan Securities.
Under China’s market rules, major shareholders of non-tradable stocks are subject to one or two years of lock-up before they are permitted to trade.
Among the most active stocks in Shanghai was China Shipbuilding Industry, up 10 percent, and China National Nuclear Power surged 9.98 percent.
Making Friday’s 2%-plus rally look like chump-change, Chinese stocks ripped higher on Monday with most mainland indices posting gains in excess of 4%.
Under the Hong Kong-Shanghai Stock Connect scheme, a net 0.06 billion yuan went northbound to Shanghai, a tiny fraction of the 13 billion yuan daily quota.
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China stocks surged on Monday, shrugging off disappointing economic data released over the weekend, as investors paid more attention to more stimulus measures from Beijing, while Hong Kong shares slipped lower as it was dragged lower by banks and insurance blue-chips.
