Shanghai's key stock index rose on Tuesday led by property developers on expectations China's government will refrain from any additional steps to cool the real estate market. The Shanghai Composite Index rose 0.4 percent to 2,671.9 points, up over 15 percent since early July. Hong Kong's Hang Seng index edged 0.1 percent higher.
Improving liquidity following large capital raisings by Chinese banks and growing investor appetite for Chinese shares have helped the Shanghai Composite outperform other regional indices since the beginning of July. The index lost almost a quarter of its value over the second quarter after Beijing moved to rein in property speculation, stirring fears that harsh tightening would lead to a sharp economic slowdown.
Data from the National Development and Reform Commission showed property prices have stabilised in major cities last month and although existing policies look set to stay, analysts say new measures are unlikely. "The fear of further policy tightening is taking a backseat at the moment," said Louis Wong, research director at Hong Kong-based Phillip Securities, referring to policies targeting the property market.
Shanghai's property sub-index has recovered some of its losses in past few weeks and rose 1.1 percent on Tuesday, but is still down 20.6 percent this year. Developer Gemdale Corp gained 0.9 percent, while China Vanke Co Ltd rose 0.6 percent. Everbright Bank's Wednesday share trading debut will be watched closely as a gauge of overall market sentiment following the 76.3 percent surge in shares of Jihua Group s on their debut on Monday. The Hong Kong market ended marginally higher after property stocks rose by the close of trading after strong land auction results on Tuesday suggested demand for property remained strong.
Hong Kong auctioned two pieces of land in Kowloon for a combined value of HK$7.61 billion, above market expectations, just days after the government announced a series of measures to cool the sizzling property market. The property sub-index rose as much as 1.1 percent after the auction results but eased to end the day 0.5 percent higher. Sino Land gained 3.6 percent. It was the most heavily traded stock on the Hang Seng index with over three times the stock's 30-day average volume changing hands. Turnover on the Hong Kong stock exchange fell to its lowest in over three weeks, tracking the dip in trading activity seen on Wall Street overnight.
The technical outlook for the Hang Seng Index, which is testing a key support at its 200-day moving average, points to further downside. A momentum indicator, the moving average convergence-divergence, has also recently turned bearish. A sustained rally in mainland shares, however, would lend support to the Hong Kong market, Phillip Securities' Wong said.