CHINA SHARES Continue Ascent Despite Massive Share Unlock

Shanghai QiangSheng Holding (SHA: 600662) jumped on a theme park contract between Disney and the municipality. Photo: Disney

CHINA SHARES continued their winning ways with the benchmark Shanghai Composite Index closing up 0.96% today at 3,159.51.

Meanwhile, Hong Kong's benchmark Hang Seng rose 0.35% to 24,964.37.

Agricultural and construction counters lifted Chinese shares despite news that some two trln yuan in A-shares will be unlocked this week for trade, which ordinarily would stymie buying sentiment.

But this is no ordinary period for the market, with the Shanghai Composite Index at seven-month highs.

A Chinese language piece in SinaFinance cited an official media report as saying the re-floated A shares, traded in both Shanghai and Shenzhen, belong to 29 listed firms and are worth around 11% of the total market capitalization of the A-share listcos, a factor which analysts say could bring about liquidity pressures and potential price volatility in coming sessions.

The official Xinhua news agency said that 162 bln shares from nine Shanghai-listed firms and 998 mln shares from 20 Shenzhen-listed firms would begin trading once again as early as today.

But this ongoing market dilution failed to slow the surging Shanghai Composite Index, which has rallied by nearly 20% in the past six weeks alone following a summer of bearish sentiment largely emanating from economic policy targeting the country’s runaway property sector.

One factor driving agricultural sector stocks today was a consensus among economists that October inflation figures will come in above expectations, with the consumer price index (CPI) for last month forecast to rise in excess of 4.0% year-on-year, which would be a 0.4 percentage point clip faster than September inflation growth.

This is good news for the food sector given the role of soft commodities in the composition of the country’s CPI basket.

The farming and fisheries sub-index was the star performer today, adding 5.1%.

Gansu Yasheng Industrial (Group) Co Ltd (SHA:600108), a Lanzhou-based distributer of produce and refined chemicals, rose its daily 10% limit to close at 6.47 yuan today.

Shenzhen Agricultural Products (SZA: 000061) added 2.2% to close at 23.99 yuan.

Analysts said expectations of rising food prices as well as the recent 7% hike in cotton futures on the Zhengzhou Commodities Exchange were fueling bullish sentiment in the sector.

They added that Washington’s recent injection of 600 bln usd into the market to will the sluggish US economy into job creation would also contribute to higher prices globally, and listed Chinese shares with sensitivity to higher-than-expected CPI figures were being paid particular notice by investors.

Raring to Go: Rare earth exporter Jinduicheng Molybdenum

(SHA: 601958) surged on strong demand. Photo: Company

Other major movers today, mainly reacting to higher CPI forecasts and a combination of share unlocking activities and continued strong fund flow into the markets, included Shanghai Bailian Group Co Ltd (SHA:600631), up its daily 10% limit to 18.22 yuan, and rare earth exporter Jinduicheng Molybdenum Co Ltd (SHA:601958), rising 8.8% to 31.92 yuan.

Another big gainer was Shanghai QiangSheng Holding Co Ltd (SHA:600662) up its daily 10% limit to 9.23 yuan, which expected major business after Walt Disney Co signed an agreement with Shanghai to construct its first theme park on the Chinese mainland.

Other sectors were by no means left out in the cold with China Minsheng Banking Corporation Ltd (SHA: 600016) up 1.1% at 5.74 yuan and China Vanke (SZA: 000002), the country’s largest listed developer, up 1.64% at 9.90 yuan.

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