China’s stocks rose, sending the benchmark index to a 19-month high, before the release of HSBC Holdings Plc and Markit Economics’ manufacturing report tomorrow. Industrial companies led the advance.
China Shipbuilding Industry Co., the nation’s largest maker of vessel equipment, jumped 9.2 percent and China CSSC Holdings Ltd. surged 4.3 percent. The HSBC report will probably show the purchasing managers’ index for September was 50.5 last month, unchanged from the previous month’s level. The statistics bureau will release the official manufacturing index on Oct. 1.
The Shanghai Composite Index (SHCOMP) climbed 0.5 percent to 2,359.82 as of 9:54 a.m., set for the highest close since February 2013. The index has advanced 12 percent this year on expectations an exchange link with Hong Kong will fuel fund inflows. Hong Kong’s benchmark Hang Seng Index slid 1.4 percent amid the biggest police crackdown on protesters since the city returned to Chinese rule.
“Shanghai continues to confound speculators, as it rallies on,” Hao Hong, Hong Kong-based strategist at Bocom International Holdings Co., wrote in a report today. “With the situation unfolding in Hong Kong, it is conceivable that overseas investors could short Hong Kong as a hedge for their long Shanghai positions after the Connect program commences.”
The CSI 300 Index added 0.6 percent to 2,450.78. Mainland markets will be shut from Oct. 1 to Oct. 7 for the National Day holidays. The Hang Seng China Enterprises Index (HSCEI) fell 1.2 percent. The Bloomberg China-US Equity Index added 0.7 percent in New York on Sept. 26.
Profits Drop
Shanghai container shipping rates rose about 4 percent in September from year-earlier levels, while pricing across China gained about 0.5 percent, according to Tim Craighead, director of Asian Research for Bloomberg Intelligence. Rates have increased for five months, supported by growth in U.S. and European exports this year, he said.
Total profits of China’s industrial enterprises fell 0.6 percent from a year earlier in August, the National Bureau of Statistics said over the weekend. That compares with July’s 13.5 percent increase and is the first drop since August 2012, based on previously reported data.
With little sign of a trough in China’s economic slowdown in the final months of the year, the central bank faces increasing pressure to dust off stimulus tools that have gone unused for more than two years.
Traditional Tools
The weakening in growth, seen in manufacturing and lending data this month, catches the People’s Bank of China amid a shift in its policy framework toward adopting market-based interest rates. As targeted liquidity injections have yet to arrest the slowdown, cutting banks’ required-reserve ratios and lending rates loom as standby measures.
“It is easier to use the traditional tools,” said Liu Li-Gang, chief Greater China economist in Hong Kong at Australia & New Zealand Banking Group Ltd. Once the financial system is accustomed to using market-based rates to set borrowing costs, “then they could shift to being a western-style rate-targeting central bank,” said Liu, who previously worked at the World Bank and the Hong Kong Monetary Authority.
In Hong Kong, police clad in riot gear used tear gas and pepper spray to scatter protesters after they surrounded government buildings and blocked traffic on main roads in and around the Central business district, home to the world’s fifth-largest stock market. Thousands of demonstrators remained at 8:04 a.m., with highways and streets still obstructed by makeshift barriers. The showdown adds to concerns about falling retail sales and rising U.S. interest rates that have fueled a 6.5 percent drop in the Hang Seng index from this year’s high on Sept. 3.
Hong Kong
“Sentiment will be bad,” said Arthur Kwong, the Hong Kong-based head of Asia Pacific equities at BNP Paribas Investment Partners, which manages about $650 billion. “Unfortunately, the macro fundamentals are weak already.”
Day one for shareholders of Alibaba Group Holding Ltd (BABA:US) was great. Week one proved less so.
China’s largest e-commerce company slumped 3.7 percent to $90.46 last week after having soared 38 percent in its Sept. 19 debut on the New York Stock Exchange.
Alibaba, which was founded 15 years ago by Jack Ma, started trading after its record $25 billion initial public offering amid reports that indicated the world’s second-largest economy is slowing as the housing market slumps. While investors looking to tap into the world’s largest market of Internet users piled into the IPO, the economic slowdown is spurring concern the company, which gets almost 90 percent of its sales from China, may struggle to sustain growth.
“The slowdown is real and the impact on Alibaba will be shown some time next year,” David Riedel, president and founder of Riedel Research Group in New York, said in a phone interview. “It makes sense to me that the stock would be flat to down after that big pop the first day because there are obviously some concerns in the market.”
To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Allen Wan
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