China: Stocks head for second annual advance on growth measures

[SHANGHAI] China's stocks swung, heading for a second annual gain as the government pumps in cash to support the country's equity market and reverse an economic slowdown.

The Shanghai Composite Index has advanced 9.2 per cent this year, extending a 53 per cent jump in 2014. The gauge rose 0.1 per cent at 11:17 am local time after changing direction nine times, with volume 29 per cent below the 30-day average for this time of day. It declined the most in three weeks on Monday as industrial companies' profits fell and concern grew that a new system for initial public offerings will weaken demand for existing stocks.

The Shanghai gauge has rebounded from an August low as the state intervened to stem a US$5 trillion equity-market rout. With the economy poised to grow at the slowest pace in two decades, policy makers signaled they will increase fiscal spending and introduce measures to stimulate the housing market.

"Investors are on the sidelines towards the end of the year," said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management, who's keeping his stock allocation unchanged. "We still like new-economy stocks that fit well with the theme of China's economic transformation." The CSI 300 Index and Hong Kong's Hang Seng China Enterprises Index were little changed, while the Hang Seng Index added 0.2 per cent.

A measure tracking phone stocks retreated 1.1 per cent, the biggest drop among the CSI 300's 10 industry groups. China United Network Communications Ltd lost 2.6 per cent on concerns the telecom industry will be hurt by the latest anti-graft campaign. The company controls Hong Kong-listed China Unicom (Hong Kong) Ltd.

China Telecom Corp chairman Chang Xiaobing is being probed for severe disciplinary violations, the Central Commission for Discipline Inspection said in a statement on Sunday. Chang headed China Unicom for more than a decade before moving to China Telecom in September.

Evergrande Real Estate Group shares were suspended from trading in Hong Kong ahead of a statement relating to a "major transaction." The company said last week that it will raise US$1.5 billion by selling convertible securities to investors including New World Development Co, replenishing capital after an acquisition spree this year.

Shaanxi Coal Industry Co lost 1.8 per cent, while Yanzhou Coal Mining Co retreated 0.8 per cent. Oil led a retreat among commodities on Monday, sliding 3.4 per cent from a three-week high as Iran repeated its goal of boosting exports after sanctions on the country are lifted.

Margin traders reduced holdings of shares purchased with borrowed money for a second day on Monday, with the outstanding balance of margin debt on the Shanghai Stock Exchange falling to 690.8 billion yuan (S$150 billion).

BLOOMBERG