China stocks post 3rd week of gains on strong earnings, reform hopes
China stocks edged up on Friday to cap their third week of gains, bolstered by robust corporate earnings and signs of accelerated reforms of state firms.
Investor confidence has also been buoyed by expectations that markets will remain bullish in the lead-up to a key Communist Party congress in mid-October, which could give more clues on the government’s policy priorities for the next five years.
State media said late on Thursday that China’s once-every-five years party congress will start on Oct. 18.
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The blue-chip CSI300 index rose 0.2 percent to 3,830.54 points, while the Shanghai Composite Index also added 0.2 percent to 3,367.12 points.
For the week, CSI300 gained 0.9 percent, while SSEC was up 1.1 percent, trading firmly above the key 3,300 mark which it breached last week.
Analysts say if the Shanghai Index can remain firmly above the 3,300 mark – a level that has proven to be stiff resistance — market bears would start to capitulate.
“With the date of the Party Congress finally set, uncertainty has been removed, boosting risk appetite,” said Yang Hai, analyst at Kaiyuan Securities.
“It also fuels expectations that reforms in the state sector will accelerate.”
Sentiment was also lifted on Friday by a private survey showing China’s manufacturing activity expanded at the fastest pace in six months in August, echoing robust findings in a similar official survey published on Thursday.
UBS strategist Gao Ting said in a report that profitability at major industrial firms could improve further, thanks to Beijing’s stepped-up efforts to shut more excess capacity and reduce pollution.
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“We don’t think the market has fully priced in the intensity and duration of environmental policy enforcement over the long term, nor the way it could accelerate Chinese enterprise upgrades,” Gao wrote.
“Rising industry concentration could drive major profitability increases.”
For the week, material shares led gains with a 4.5 percent rise, thanks to a year-long construction boom that has produced robust earnings growth and to a stronger yuan. The index has surged over 30 percent so far this year.
The yuan currency strengthened to a fresh 14-month high against the U.S. dollar on Friday after coming off a robust August, its best month on record.
However, banking stocks lost 2 percent in the week, as investors pocketed gains after the country’s biggest lenders released half-year results.
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