Hong Kong shares snapped a four-day losing streak on Tuesday as the best single-day gains since May 2009 pulled the Hang Seng Index out of technically oversold territory, but turnover declined for a second straight session. Gains were supported by a short squeeze, particularly in stocks that have been most battered recently. Ping An Insurance (Group) Co of China Ltd jumped 10.1 percent after plunging 14 percent on Monday.
The Hang Seng Index closed up 4.2 percent at 18,130.6 points, lifted by outperforming mainland names that helped the China Enterprise Index leap 6.4 percent. In the near term, technical resistance is seen at around 18,296 on the Hang Seng, the bottom end of a downside gap that opened between the intraday low on September 21 and the opening high on September 22. This gap is one of at least three that formed after it lost almost 13 percent this month amid a global market rout.
Tuesday's gains for Ping An, China's second-largest insurer, came in volume almost twice its 30-day average after the mainland's second-largest insurer reiterated late on Monday that "it was business as usual at the company." Its Monday sell-off was triggered in part by foreign funds pulling money out of the company to bring funds back home as well as concern about its possible exposure to Hong Kong and China real estate trusts. Ping An shares in Hong Kong have lost almost half their value so far this year, pushing multiples to the lowest since mid-2004. The shares currently trade at 10.4 times forward 12-month earnings compared with a historical median valuation of 24 times.
Materials names also saw strong gains. Jiangxi Copper Co Ltd jumped 17.3 percent in more than twice its 30-day average volume after sinking to the lowest since July 2009 on Monday. Aluminum Corp of China Ltd (Chalco) gained 6.7 percent. Goldman Sachs reiterated a buy rating on Jiangxi Copper in a report on Tuesday, based on an analysis implying a 29 percent upside to the share price. Goldman analysts also assigned a buy rating to Chalco in the same report, saying their base scenario suggested 68 percent upside potential for the stock on a 12-month basis.
Coal and financial stocks were among the top 10 boosts on the Shanghai Composite Index, helping it snap a three-day decline. It ended up 0.9 percent at 2,415.1, though A-share turnover sinking to its lowest in the last week. Ping An gained 1.8 percent after slumping a maximum 10 percent on Monday. It was in a bunch of five financial names among the top 10 boosts that also included Bank of China, which gained slightly over 1 percent. The Shanghai energy sector index, outperformed, gaining 1.7 percent on the day.
The index is down almost 9 percent on the quarter to date, compared to the Shanghai Composite's 12.5 percent decline. The largest coal producer on the mainland, China Shenhua Energy Co Ltd and its biggest rival, China Coal Energy Co Ltd gained over 2 percent each.
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