China Stocks Jump to Seven-Month High on Shenzhen Link Optimism
August 14, 2016 — 7:26 PM PDT Updated on August 14, 2016 — 8:31 PM PDT
Chinese stocks climbed to a seven-month high on surging turnover as takeover speculation buoyed property developers and shares in Shenzhen rallied after a report said details of a delayed exchange link with Hong Kong will be announced shortly.
The Shanghai Composite Index gained 2.1 percent at 11:22 a.m. A measure of real estate companies headed for its steepest two-day rally in almost a year after stake purchases by China Evergrande Group fueled optimism of more mergers. The ChiNext Index rose 2.6 percent after the Hong Kong Economic Journal said small-cap shares in Shenzhen will be included in the link and the start date may be announced as soon as this week. A gauge of Chinese stocks in Hong Kong advanced for an eighth day.
“The market is expecting the connect will be open shortly," Linus Yip, a strategist at First Shanghai Securities Ltd. in Hong Kong. “There’s much talk about mergers and acquisitions" in the real estate industry, he said.
The link between Hong Kong and Shenzhen, which expands on an existing connect program with Shanghai, will start in December, the Hong Kong Economic Journal reported, citing unidentified funds briefed by exchange officials. The aggregate quota will be abolished for the Shanghai link, while only daily caps will be imposed on the Shenzhen program, according to the report. Billionaire Hui Ka Yan’s Evergrande has boosted stakes in both China Vanke Co. and Langfang Development Co.
Gains came as China’s broadest measure of new credit rose the least in two years. Aggregate financing was 487.9 billion yuan ($73.4 billion) in July, compared with the median estimate of 1 trillion yuan in a Bloomberg survey of economists, data showed Friday after markets closed.
The credit growth data “weren’t great, but the market is expecting there will be more policies coming out to help the economy, and that’s helping the A-share market as well as Chinese companies in Hong Kong,” Yip said.
