Mainland Chinese shares posted their best day in eight months on Friday, lifting the Hong Kong market, on growing signs that Beijing is accelerating spending to bolster growth. In Hong Kong, traders said gains came not only from short covering, but also long-only funds positioning for a rally in the wake of the China stimulus and reduced Euro zone risks.
Every Hang Seng Index and CSI300 Index component stock finished in the black on the day. Markets were also buoyed by the European Central Bank's decision on Thursday to launch a new and potentially unlimited bond-buying programme, aimed at cooling painfully high borrowing costs in some euro zone member countries.
The CSI300 Index of the biggest Shanghai and Shenzhen listings soared 4.5 percent, while the Shanghai Composite Index jumped 3.7 percent. Friday's gains were their best single-day showings since January 17. The Hang Seng Index firmed 3.1 percent, its best single-day gain since December 1. The China Enterprises Index of the top Chinese listings spiked 4 percent.
All four indices also posted their first weekly gain in four. The CSI300 Index rose 5.1 percent, the Shanghai Composite gained 3.9 percent, while the Hang Seng Index and the China Enterprises Index each climbed 1.6 percent. Gains came in the highest Shanghai volume since March. Even after excluding placements for AIA Group, Citic Securities and China Pacific Insurance Company (CPIC), Friday's turnover in Hong Kong was 60 percent more than its 10-day moving average, traders said.
The Chinese machinery, cement and steel sectors were among the major gainers on news that Beijing had approved a slew of infrastructure projects this week with an estimated total value of 1 trillion yuan ($157 billion). Changsha Zoomlion Heavy Industry surged the maximum-allowed 10 percent in Shenzhen and 8.1 percent in Hong Kong. "These reports are a good signal that the Chinese government is prepared to do something, although these projects will take a few years to complete and won't immediately improve data in the near term," said Alan Lam, Julius Baer's Greater China equity analyst.
Haitong Securities was up 7.5 percent in Hong Kong and 7 percent in Shanghai. China Life Insurance gained 3.1 percent in Hong Kong and 5 percent in Shanghai. But the beleaguered Chinese coal and steel sectors saw the biggest moves on the day. Yanzhou Coal rose 9.1 percent in Hong Kong, but it is still down more than 32 percent this year. Angang Steel gained 8.8 percent in Hong Kong, but it is still down more than 31 percent in 2012.
Chinese excavator maker Sany Heavy Industry jumped 10 percent in Shanghai, but it remained mired near two-year lows after the company posted its biggest quarterly profit decline since 2008 on a jump in unpaid bills. AIA Group jumped 6.8 percent to HK$28.10. Its former parent, bailed-out American International Group, raised about $2 billion after pricing a stake sale at a 0.8 percent premium to its Thursday closing price of HK$26.30.
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