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Hong Kong - Chinese stocks rose for a third day, their longest winning streak in a month, as optimism grew over President Xi Jinping’s state visit to the U.S. and brokerages rallied on prospects of an exchange link between London and Shanghai.
The Shanghai Composite Index climbed 1.2% to 3 194.65 at 07:38. Citic Securities and Haitong Securities surged more than 3%.
British officials said they will study the feasibility of setting up a London-Shanghai stock trading link. China and the US are expected to reach agreements on trade, energy, climate, finance, aviation, defense and infrastructure construction during Xi’s September 22 to September 25 visit, Foreign Minister Wang Yi said last week.
“There seems to be a premature rally in the brokerage industry,” said Shenshen Dai, a trader at SWS Futures in Shanghai. “There’s a long way to go in terms of the exchange link.”
The Shanghai Composite’s three-day, 3% rebound comes amid plunging turnover and the world’s wildest price swings.
Volatility surged as the government took unprecedented measures to stop a $5trn plunge, and remains elevated amid uncertainty over the state’s appetite to provide more support and signs of a weakening economy. Preliminary data on Wednesday will likely signal a contraction in manufacturing.
‘Invisible hand’
The government will “make good use of both the invisible hand and the visible hand” to enable the market to play a decisive role in resource allocations, Xi said in an interview with the Wall Street Journal. The authorities will “maintain an open, fair and impartial market order” to protect the interests of investors in the stock market, he said.
The Hang Seng China Enterprises Index gained 0.8%, while the Hang Seng Index added 1%. The CSI 300 Index rose 0.9%, led by financial and energy stocks.
Brokerages led gains for financial companies, with Shanxi Securities surging 10% and Western Securities jumping 8%. PetroChina, which has the biggest weighting on the Shanghai Composite, rose 1.5%, the most in a week.
London link
The London-Shanghai stock link study will be discussed by the next round of the annual talks, UK Chancellor of the Exchequer George Osborne said at a briefing in Beijing on Monday. The connect would be positive for Chinese and British equity markets, according to a front-page commentary in the Securities Times.
London Stock Exchange Group Plc’s plan to sell Russell Investments to China’s Citic Securities Co. is faltering and may soon collapse, people with knowledge of the matter said.
The plunge in the Chinese stock market since mid-June, as well as investigations into some Citic Securities executives, have derailed the discussions, the people said.
The Hong Kong-Shanghai exchange link, which began last year, was hailed as a major step in China allowing more foreign access to the world’s second-biggest equity market and a catalyst for the Shanghai Composite’s doubling from the program’s November 17 start through to a June peak.
Tech deals
Technology companies may benefit most from Xi’s visit, which concludes with a summit with President Barack Obama on Friday, according to Shenwan Hongyuan Group. Deals announced before the trip included the first Chinese-made bullet-train project in the US.
“Some investors are heartened by optimism over Xi’s visit to the US,” said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong. “The market is in a cautious mode, keeping a close watch on the progress of talks between the two countries.”
The Caixin Media and Markit Economics’ manufacturing Purchasing Managers’ Index, known as the flash PMI, will likely show a reading of 47.5 for September, compared with August’s 47.3, based on the median estimate of 22 economists surveyed by Bloomberg. A reading below 50 signals contraction.
