After a long decline to their lowest levels for four years, Chinese stocks finally bounced off the bottom on Wednesday on hopes of more action from Beijing to boost the economy.
The Shanghai Composite closed 2.9 per cent higher, with construction-related groups leading the way, headed by Sany Heavy Industry (up 10 per cent). This may be an over-reaction to the new administration’s proposals for an acceleration in urban development. But if these plans become policies, foreign fund managers who have been buying China recently will be congratulating themselves on their foresight.
Investors were also buoyed by news from the financial sector, with reports of government plans to relax rules on banks investing in insurance and news of HSBC selling its $9.4bn stake in Ping An Insurance, the second-largest insurer, to companies controlled by Thailand’s Charoen Pokphand Group. Ping An rose 4.1 per cent on relief that the 15.6 per cent holding seems to have found a new long-term owner.
The bulls were equally strong in Shenzhen where stocks rose 3.8 per cent, and in Hong Kong, where the Hang Seng closed 2.2 per cent up, and the China Enterprises Index finished 2.7 per cent higher.
But the euphoria was largely limited to China, with markets elsewhere held back by the concerns about the US fiscal cliff. The $-based MSCI index for Asia-Pacific excluding Japan was up by just 0.9 per cent.
In any case, China has a lot of ground to catch up. As the chart shows, Shanghai is down 6 per cent on the year, while the MSCI Asia-Pacific ex-Japan is up 14 per cent.
Over the global crisis years, the contrast is even greater.