China: Stocks head for longest winning streak in two months

[HONG KONG] China's stocks rose for a sixth day, sending the benchmark index toward its longest stretch of gains since May, amid speculation the government's spate of support measures have stabilised equities.

The Shanghai Composite Index climbed 1.7 per cent to 4,092.20 at 1.24pm, led by financial and material shares. Trading interest has waned during the market's recent rebound, with the benchmark index posting daily price moves of less than 1 percent this week, volatility falling to one-month lows and trading volumes slumping 11 per cent from the 30-day average.

"Volatility has certainly fallen off in a big way and we are seeing sustained signs of stability," said Bernard Aw, a Singapore-based strategist at IG Asia Pte. "The upshot is that this sideways grind is going to stay for a while longer as onshore markets slowly resume normalcy, with the government carefully scaling back the support measures."

The Shanghai index has risen 16 per cent since July 8, rebounding from a month-long rout that wiped out almost US$4 trillion in market value, after officials allowed more than 1,400 companies to halt trading, banned major shareholders from selling stakes, suspended initial public offerings and gave a government agency access to more than US$480 billion of borrowed funds to help finance equity purchases.

China should exit from some contingency measures to stabilize financial markets at an "appropriate time," the People's Daily said in an article on Thursday. The government should also normalise some measures that are consistent with reforms, the newspaper said.

Financials Gain Hong Kong's Hang Seng China Enterprises Index rose 1.1 per cent, while the Hang Seng Index advanced 0.7 per cent. The CSI 300 Index added 1.7 per cent.

Brokerages paced gains among financial shares, with Citic Securities Co and Haitong Securities Co both advancing at least 2 per cent. Ping An Insurance (Group) Co jumped 3.4 per cent after the second-largest Chinese insurer said it expects first-half net profits to have risen 62 per cent.

Margin traders increased holdings of shares purchased with borrowed money for a fourth day on Wednesday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising to 928.9 billion yuan (S$205.2 billion).

Material producers advanced before Friday's manufacturing data. A preliminary index of manufacturing, known as the flash PMI, probably rose to 49.7 in July from 49.4 a month earlier, according to the median estimate of a Bloomberg survey. A reading below 50 indicates contraction.

Yunnan Tin Co surged by the 10 per cent daily limit, while Anhui Conch Cement Co rose 4.5 per cent.

BLOOMBERG