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Hong Kong - Chinese stocks climbed to a one week high as commodity producers rallied and the central bank stepped up efforts to ease a cash shortage before mainland markets close for the lunar New Year holidays next week.
The Shanghai Composite Index rose 1.5% to 2 781.02 at the close, the highest level since January 25.
Shenzhen Zhongjin Lingnan Nonfemet led a gauge of material companies higher. PetroChina climbed as a measure of energy companies gained from a record low after crude futures extended the biggest rally in almost two weeks.
The Hang Seng Chinese Enterprises Index halted a three-day loss, adding 2.1% at 3:09 p.m. local time.
The People’s Bank of China injected 80bn yuan ($12bn) into the banking system using 14-day reverse repurchase agreements Thursday as demand for cash rose in the run up to the weeklong Chinese holidays starting on February 8. The monetary authority raised the yuan’s fixing by the most since December 4.
Mainland markets will be closed all next week.
“The PBOC is trying to bolster sentiment before the holidays with a rebound in oil and commodity prices giving a helping hand,” said Ronald Wan, chief executive at Partners Capital International in Hong Kong.
“It is too early to celebrate though, as underlying concerns over the economy have not abated and volatility in commodity prices remain.”
China set a range for its growth target for the first time in 20 years, saying the world’s second-largest economy would expand 6.5% to 7% in 2016. The nation’s central bank plans to loosen rules for when foreign investors can bring money in and out of the country in a signal of its commitment to further open financial markets, according to people with direct knowledge of the matter.
The benchmark Shanghai gauge has fallen 46% since its June high, dragged down by a slowing economy, yuan volatility and concern about the government’s ability to manage both as capital outflows hit a record last year. Trading in Shanghai was 15% below the 30-day average.
PBOC’s open-market operation on Thursday adds to last month’s injection of almost 2trn yuan using short- and medium-term lending tools as the central bank seeks to prevent borrowing costs from rising as seasonal demand for funds climbs along with record capital outflows. The benchmark seven-day repurchase rate rose five basis points to 2.46%, reversing an earlier decline.
The PBOC set the daily fixing, which restricts onshore moves to a maximum 2% on either side, at 6.5419 a dollar, 0.16% stronger than the previous day’s reference rate. The yuan fell 0.08% to 6.6162 a dollar in Hong Kong, after it strengthened 0.26% on Wednesday, data compiled by Bloomberg show, while the onshore currency fell 0.02% to 6.5779.
Commodities rally
A gauge of material companies rose 2.8%, the most among industry groups on the CSI 300 Index, which advanced 1.2%. Hainan Mining Co. rallied by the daily 10% limit, while Jiangxi Copper jumped 5.8%. PetroChina added 0.6%, while Offshore Oil Engineering and Sinopec Shanghai Petrochemical increased more than 2% as crude prices extended its rebound from the lowest level in almost seven years.
Citic Securities Co. added 2.4% in Hong Kong. Five executives who had been implicated with investigations after China’s summer stock rout have returned to the brokerage, Caixin magazine reported on Thursday. The returning executives include Managing Director Xu Gang, chief financial officer Ge Xiaobo and investment-banking head Chen Jun, Caixin said, without saying where it got the information. President Cheng Boming wasn’t among the five, according to the report. Citic Securities declined to comment.
Trading debut
In Shenzhen, two companies jumped by the daily limit on their first day of trading. Shares of Shanghai Haishun New Pharmaceutical Packaging and Suzhou Institute of Architectural Desig surged 44%.
Traders reduced their bets of stocks purchased with borrowed money with the outstanding balance of margin debt on the Shanghai stock exchange dropping 0.5% to 526.4bn yuan on Wednesday, the lowest level since November 27, 2014.
