Bank of China’s 22% stock surge prompts unusual trading question
CHINESE financial stocks extended their recent rally, as traders continued to bet on policy support for state-run firms to help regain momentum in a market faced with renewed growth concerns.
The CSI 300 Financials Index jumped as much as 1.4 per cent on Tuesday (May 9), on track for a six-day winning streak, the longest in four months. Bank of China led the pack with a 6.2 per cent jump, even after it said business operations are normal and it has nothing major to disclose.
A Bloomberg gauge of onshore-listed brokerage shares also surged as much as 4.1 per cent, reaching its highest level in 11 months.
The latest gains in major state firms from banks to securities firms and telecom operators indicate that Beijing’s pledge to widen funding access for them has offered investors a fresh reason to restart a stalled reopening rally. Several Chinese lenders’ recent decisions to cut deposit rates also have boosted appetite for the banking sector.
“When the market sentiment is still fragile and investors are relatively conservative in their moves, bank names are often favoured in China,” said Redmond Wong, strategist at Saxo Capital Markets HK. “Investors like their dividend yields and the call from the authorities to ‘discover the value’ in central SOEs.”
The gains came with surging trading volume, pointing to a rally driven mostly by trading momentum rather than fundamentals. Chinese lenders posted a tepid set of first-quarter earnings as they faced deeper margin woes despite being sheltered from the recent global banking jitters.
“Foreign investors, asset management firms as well as individual investors should be the buyers of Chinese banks,” Wang Jian, chief financial analyst at Guosheng Securities, wrote in a note on Tuesday. As the banking sector gradually returns to normal this year, there should be a “modest recovery” of their fundamentals, he added. BLOOMBERG
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