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China stocks trade near nine-month high

Shanghai - China’s stocks traded near a nine-month high after a rally spurred by bets the government will boost spending on infrastructure. The listed unit of Baosteel Group, the steelmaker that’s merging with a local rival to become China’s biggest, jumped on a turnaround in earnings.

The Shanghai Composite Index lost 0.1% at 08:25 after closing on Monday at its highest level since January 8. Baoshan Iron & Steel rose 2.3% after reporting its best quarterly performance since 2012.

China Communications Construction, a transportation infrastructure group, slipped 3%, set for its first decline in nine trading sessions. The Hang Seng Index retreated 0.2% in Hong Kong. 

China’s gross domestic product has increased at a 6.7% pace for three straight quarters, spurring optimism the economy has stabilised. State-owned companies have advanced on bets the government will speed up a structural overhaul and boost spending on large public projects. The leaders of China’s ruling Communist Party are gathering in Beijing this week for a major policy meeting.

"The market is staging a consolidation after the recent decent gain and some of the leading gainers such as infrastructure names are seeing profit taking,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai.

"The market may continue to go up after the consolidation. Also, during major events, there’s a need to maintain market stability."

The Shanghai Composite stood at 3 123.02. The CSI 300 Index declined 0.3%, while the Hang Seng China Enterprises Index fell 0.2%.

Sentiment on Chinese assets has been tempered by accelerated declines in the yuan, with the offshore rate dropping to unprecedented levels and the price on the mainland sliding to a six-year low. Stock investors will accept a gradual depreciation of the yuan, said Wu, adding that the nation’s efforts to control a rise in property prices may increase the flow of funds to equities.

Chinese authorities in at least 21 cities have introduced home-buying curbs, ranging from raising down-payment requirements to purchase bans. The value of China’s new home sales rose 61%in September from a year earlier.

The Shanghai Composite still needs to rise above an intraday high of 3 140.44 set on August 16 to break out of a range-bound pattern that it has been stuck in over the past two months.

Steelmakers climb

Baoshan Steel rose to its highest level since October 11. The steelmaker posted third-quarter net income of 2.13 billion yuan, compared with a loss of about 920 million yuan a year ago. It said it expects a 600% to 800% surge in 2016 net profit. Hesteel added 0.6%, while Angang Steel gained 0.7%.

China Railway and Power Construction of China dropped at least 3%.

The two stocks have gained this month on expectations that the government will step up infrastructure building to bolster growth. China will invest more than 1 trillion yuan in urban rail projects by 2020, the state-run Economic Information Daily reported, citing calculations it performed by adding up figures of previously approved projects.

Belle International tumbled 9.3% in Hong Kong, its biggest slide since March 2014. The retailer of women’s footwear reported first-half net income of 1.73 billion yuan, down from 2.16 billion yuan a year ago.

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