China stocks rise on robust factory activity data, Xi’s speech
Tech shares surge, continuing their outperformance against traditional sector stocks
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[SHANGHAI] China stocks rose on Wednesday (Jul 1), encouraged by robust factory activity data and President Xi Jinping reiterating a promise of “high-quality development”, even as concerns remain over the economy’s uneven growth.
The large-cap index CSI300 gained 0.4 per cent by the lunch break, while the Shanghai Composite Index rose 1.1 per cent. The Hong Kong market was closed for a public holiday.
China’s manufacturing sector expanded for a seventh straight month in June, completing its strongest quarter since late 2020, a business survey showed on Wednesday. President Xi pledged on Wednesday to “steadily promote high-quality development”, which refers to sustainable, innovation-driven growth.
Tech shares surged, continuing their outperformance against traditional sector stocks and mirroring the real economy’s two-speed growth.
Goldman Sachs said in a note that in meetings with Chinese investors over the past week, “local clients appeared more cautious on China’s near-term growth momentum”, reflecting “a more bifurcated growth mix”.
“Discussions focused on fragile consumer confidence amid labour market pressures and the negative wealth effect from the ongoing property downturn,” the bank said.
An index tracking chipmaking equipment and materials jumped nearly 4 per cent on Wednesday to fresh record highs.
Stocks in innovative sectors including biotech and software also gained.
Some traditional sectors, including agriculture and property also rose sharply on Wednesday, reflecting broadening interest from investors.
“We see a lot of growth on offer at better than reasonable prices in China across sectors. So, this is not just a defensive allocation of capital for us,” said Vikas Pershad, portfolio manager for Asian Equities at M&G Investments.
“We’ll see in a few years if the earnings and valuations have justified that allocation of capital. But we think it does, which is why we’ve done that.” REUTERS
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