Chinese stocks rise to five-year high after Li’s pledge on economy

Li Keqiang, China’s premier, applauds during the closing session of the third session of the 12th National People’s Congress (NPC) at the Great Hall of the People in Beijing

Chinese stocks gained, with the benchmark index climbing to its highest level since August 2009, after Premier Li Keqiang pledged to take action if economic growth slows too much and the benchmark money-market rate fell.
Hundsun Technologies Inc. and Glodon Software Co. surged more than 9 percent as a gauge of technology shares extended its gain this year to 40 percent after Li encouraged the development of e-commerce. China Mobile Ltd. advanced the most in a month in Hong Kong. Huadong Medicine Co. jumped by the 10 percent daily limit to lead consumer shares higher. The number of advancing stocks was at a record-high. The seven-day repurchase rate slid the most in five weeks as funds locked up for new share sales returned to the banking system.
The Shanghai Composite Index rose 2.3 percent to 3,449.31 at the close, extending last week’s 4.1 percent increase. Li said Sunday the government will take additional steps if China’s growth, which the government targeted at 7 percent this year, drifts toward the lower limit of its range and cuts into employment or wages. About 3 trillion yuan (USD479 billion) was set aside for initial public offerings last week, according to the median estimate in a Bloomberg survey of brokerages.
“Li’s positive tone on growth bolstered investor confidence,” said Yen Chiu, a trader at Shenwan Hongyuan Group Co. in Hong Kong. “Technology stocks are getting a boost on the economy’s reliance on the sector for growth.”
There were 973 stocks that rose on the Shanghai Composite yesterday, the most since Bloomberg began compiling the data in 1997, while nine fell and 78 were unchanged.
The CSI 300 Index rose 2.4 percent. Hong Kong’s Hang Seng China Enterprises Index added 0.9 percent and the Hang Seng Index gained 0.5 percent. The Bloomberg China-US Equity Index slid 0.9 percent in New York on Friday.
A gauge of technology shares climbed 4.1 percent, the most among the 10 industry groups on the CSI 300. The ChiNext index advanced 3.6 percent. Hundsun Technologies soared to a record and Glodon Software jumped by the 10 percent maximum.
Earnings for Chinese technology companies have been revised upwards by 14 percent in the past month, compared with a 1 percent downward revision for the CSI 300 as a whole, according to HSBC Holdings Plc analysts including Roger Xie in a report dated March 13.
Indexes tracking consumer staples companies and drugmakers rallied more than 2.4 percent. Huadong Medicine rose to a record and Zhangzhou Pientzehuang Pharmaceutical Co. gained 5.7 percent.
The seven-day repurchase rate, a gauge of interbank funding availability, dropped 10 basis points to 4.6155 percent, according to a weighted average from the National Interbank Funding Center. That was the biggest decline since Feb. 5.
Trading in Shanghai was 44 percent above the 30-day average at the close. The gauge is valued at 12.7 times 12-month projected earnings, compared with the five-year average multiple of 10.2, according to data compiled by Bloomberg.
Margin traders increased holdings of shares purchased with borrowed money for a 13th day on Friday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising to a record 880.6 billion yuan ($141 billion).
A gauge of Macau casino stocks dropped to its lowest level since December 2012 after Morgan Stanley predicted a 25 percent drop in the city’s gambling revenue this year. MGM China Holdings Ltd. fell 3 percent and Sands China Ltd. slid 1.4 percent.
Investors are rushing to buy protection against declines in Chinese stocks amid concern an economic slowdown will undermine their world-beating rally.
Demand to hedge against future losses on the largest U.S. exchange-traded fund tracking China’s mainland market climbed to the highest since the ETF was created in November 2013, according to data compiled by Bloomberg. The buying pushed the ratio of bearish to bullish contracts to a five-month high on March 11 as investors pulled $34 million from the fund in a second week of outflows.
While the economy is growing at the slowest pace since 1990, the Shanghai Composite has jumped 64 percent in the past year through last week, the best performance among major equity gauges tracked by Bloomberg.
China’s total public and private debt has increased to more than twice the nation’s economic output, soaring 83 percentage points relative to gross domestic product since 2007. No other developing country has amassed as much debt as quickly, according to data compiled by McKinsey Global Institute. Kyoungwha Kim, Bloomberg