China stocks surge on fresh stimulus plans from Beijing

Stocks in China and Hong Kong surged Monday on stimulus measures from Beijing and signals of reform in the country’s telecommunications sector.

The Shanghai Composite Index SHCOMP, +3.28% rose 3.3% while Chinese firms in Hong Kong led the Hang Seng Index HSI, +1.21% up 1.3%.

China’s central bank announced over the weekend that it would expand a pilot program that would boost banks’ lending abilities. The plan, currently in place in Shandong and Guangdong, allows banks to pledge certain assets to secure loans from the central bank. It will be expanded to nine provinces including Shanghai and Beijing.

“The market has widely interpreted the move as China’s version of quantitative easing,” said Jacky Zhang, analyst at BOC International.

Meanwhile, Hong Kong-listed China Telecom Corp., CHA, -0.10% 0728, +4.17% China Unicom Ltd. 0762, +5.50% and China Mobile Ltd. CHL, -2.83% 0941, +1.69% were up 6.3%, 5.7% and 2.2% respectively, after local media reported that a state-owned investment firm will inject cash into a tower company to be owned by the three firms.

China Reform Holdings Corp. will shell out over 10 billion yuan ($1.58 billion) to buy a 6% stake in China Tower Corp., potentially helping the jointly controlled operation develop electric-vehicle charging stations, reported the state-owned Shanghai Securities Journal on Monday.

Also buoying markets was news that China Reinsurance (Group) Corp. plans to raise up to $2 billion in an initial public offering in Hong Kong, in what would be the biggest listing in the city since Chinese stock markets collapsed in June.

“Given the sharp sell down in the market over the last few months, this re-energizes the equity markets in Hong Kong,” said Bernard Aw, strategist with brokerage IG.

Hong Kong has raised $21 billion so far this year through IPOs, despite a quiet third quarter, making it the top global listing venue.

Elsewhere, Australia’s S&P ASX 200 XJO, -0.89% was down 0.8%, while South Korea’s Kospi SEU, +0.10% was up 0.4%. Japan’s markets are closed for a holiday.

A commodities-sector rebound lifted shares last week, with oil prices climbing to their highest level since July. But “the rally is likely to fizzle out” as investors look to coming Chinese data and speeches from Fed officials, said Bernard Aw, market strategist at brokerage IG.

To be sure, Chinese export data due Tuesday is unlikely to show an improving economic picture.

Nomura projects that China’s exports fell 8% in September from a year earlier. In August, China reported a 6.1% decline on year.

While September manufacturing data showed a slight rise in factory activity from the previous month, “we still haven’t seen any massive evidence of a turnaround in China yet, “ said Bart Melek, head of commodities strategy at TD Securities. “I would be cautious.”

Weakening economic numbers also could prompt China to launch new stimulus measures, a prospect that could lift stocks.

Meanwhile, top finance officials urged the Federal Reserve to proceed with the much-awaited rate increase at an annual meeting of the International Monetary Fund. While the move would spur investors to move money back into the U.S. from emerging markets, many policy makers are frustrated by the uncertainty the Fed’s delay has introduced.

Brent crude oil LCOX5, +0.78% raded up 0.8% at $53.07 in Asia trade. It closed as high as $53.30 a barrel on Thursday, the highest level since July. Prices of oil have jumped 9% in the last five sessions.

In currencies, the Malaysian ringgit started weakening against the U.S. dollar, after reaching its strongest level since August last week. The currency was last down 0.9% against the U.S. dollar early Monday and down 19% year-to-date. The dollar traded as high as 4.41 ringgit early Monday.

The South Korean won, Singapore dollar and Australian dollar were all fractionally weaker against the U.S. dollar, having surged last week.

Authorities in China fixed trading of the Chinese yuan more strongly against the U.S. dollar for the seventh straight day. Its guidance brought the onshore yuan to its strongest level against the U.S. dollar since Beijing devalued the yuan. The dollar hit as low as 6.3324 yuan Monday.

Shares of Glencore PLC GLEN, -1.74% GLEN, -1.74% were suspended from trading in Hong Kong, pending the release of information on the firm’s assets in Australia and Chile.

The stock had surged 36% in London and 43% in Hong Kong last week as the firm shuts down operations that mine many of the most actively traded commodities, reducing gluts in everything from coal to copper.

Source: MarketWatch