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Shanghai - China’s stocks climbed for the first time in three days as steelmakers rallied after the government called on state-owned enterprises to further cut capacity to support prices.
The Shanghai Composite Index rose 0.3%, led by material producers and technology companies. Wuhan Iron & Steel rallied, while Beijing Shiji Information Technology surged more than 8%. Hong Kong’s Hang Seng Index slipped, dragged down by property developers with dollar debt as the yuan plunged against a resurgent greenback.
President Xi Jinping has vowed to press ahead with plans to reduce capacity at SOEs, while trying to boost the role of privately owned technology and service businesses.
The State Council, or cabinet, on Wednesday called for a 10% capacity cut at companies managed by the central government. Data released over the weekend indicate a pick-up in the economy may be short-lived as growth in industrial production, fixed-asset investment and retails sales all slowed in April.
“The supply-side reform of cutting overcapacity is one of the few bright spots in the market now,” said Dai Ming, a fund manager at Hengsheng Asset Management in Shanghai. “With the economy still in the doldrums, there’s an immediate chance for stocks to rise significantly.”
The Shanghai Composite was at 2 815.83 as of 07:54. The CSI 300 Index rose 0.1%. Hong Kong’s Hang Seng China Enterprises Index fell 0.3%, while the Hang Seng Index lost 0.4%.
The Shanghai Composite has slumped 20% this year, the worst performer among 93 benchmarks tracked by Bloomberg, on concern slowing economic growth will curb corporate earnings and trigger capital outflows.
The 14-day relative strength measure for the Shanghai index, measuring how rapidly prices have advanced or dropped during a specified time period, was at 33.3 on Wednesday. Readings below 30 indicate it may be poised to rise.
Measures tracking technology and material stocks gained at least 1.2% on the CSI 300. Angang Steel gained 0.5% and Wuhan Iron & Steel added 0.7%. Wangsu Science & Technology advanced 4.4% while Hundsun Technologies climbed 3.2%.
Gold producers
Gold producers dropped in mainland trading as a stronger dollar reduces the appeal of the bullion, which doesn’t generate any interest-rate return. Shandong Gold Mining fell 2.6% in Shanghai and Western Region Gold lost 1.1%.
The Federal Reserve policy makers signaled a willingness to raise borrowing costs in June if the economy continues to improve. Minutes from the Fed’s April meeting showed most officials said a rate increase would be appropriate in June if the economy continued to improve.
Traders are pricing in a 32% chance of higher borrowing costs in June, up from 4% on Monday. Wagers for a July move jumped to nearly 50% from 17% last week.
In Hong Kong, China Overseas Land & Investment retreated 0.9% and Sino Land declined 0.9%.
