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China: Stocks surge on state firm merger hopes
[SHANGHAI] China stocks jumped to fresh seven-year highs on Monday, led by heavyweights such as China Petroleum & Chemical Corp and PetroChina Co Ltd on expectations that Beijing will accelerate mergers among state-owned enterprises (SOEs).
China will likely cut the number of its central government-owned conglomerates to 40 through massive mergers, as Beijing looks to overhaul the vast underperforming state sector, state media reported on Monday.
Currently, there are 112 SOEs controlled by the central government.
The consolidation hopes outweighed investor concerns over the accelerated pace of initial public offerings (IPOs) and data showing weak earnings for industrial firms amid a slowing economy.
Profits earned by Chinese industrial firms fell 0.4 per cent in March from a year earlier, and were down 2.7 per cent in the Jan-March quarter, official data showed on Monday. "We don't see a slowdown in money inflows, so more liquidity will likely push stock indexes higher," wrote Sun Jianbo, strategist of Galaxy Securities Co. "Stepped-up IPO approvals won't change the market's upward trend."
The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 2.2 per cent to 4,807.59 points while the Shanghai Composite Index ended up 3.0 per cent at 4,527.40 points.
Oil giants China Petroleum & Chemical and PetroChina jumped by their 10 per cent limit in Shanghai on merger expectations.
Bets on consolidation also pushed shares of China Shipbuilding, CSSC Holdings Ltd and Guangzhou Shipyard International Co Ltd up over 8 per cent.
The CSI300 Real Estate Index rose over 2 per cent, amid signs that authorities were exhorting banks to do more to support the cooling property market, one of the key risks to the economy.
Loans to Chinese property developers surged again in the first quarter despite the country's housing downturn, official data showed on Friday.