Shares in Shanghai and Hong Kong rose on Thursday, tracking gains in other Asian markets after a spate of encouraging global economic data and as a funding squeeze in China eased. Strong manufacturing reports from China and the United States on Wednesday helped to ease worries about potential wider fallout from Europe's debt crisis, inspiring some bargain-hunting in Asia, with investors chasing Chinese financials and automakers.
China's central bank will refrain from draining funds from the money market on Thursday, helping to ease a shortage of funds that had prompted some investors to sell shares earlier in the week. The Shanghai Composite Index closed up 0.7 at 2,843.6 points, though off the day's highs. The index had plunged far below the closely watched 250-day moving average earlier this week, weighed down mainly by a liquidity squeeze in the domestic money market.
Hong Kong's Hang Seng Index was up 0.9 percent at 23,458.74, after falling near technically oversold territory in recent sessions. "The market is reacting to large gains in foreign markets, particularly Wall Street. On the domestic policy front, officials have said they will ensure a stable and healthy stock market," said Cheng Yi, analyst at Xiangcai Securities in Shanghai.
Financials were the biggest gainers, dominating Shanghai's most actively traded list. Top brokerage China Citic Securities jumped 2.3 percent, while Agricultural Bank of China gained 1.9 percent. Industrial and Commercial Bank of China, the world's most valuable lender by market cap, was 1.6 percent higher.
In China, new stock account openings for trading in local currency shares fell 11 percent on the week, improving from the 23 percent fall the previous week. But openings are still far off record highs hit in October, highlighting a lack of investor confidence. Volume rebounded from very thin levels on Wednesday as investors bought back into trades they had avoided over the past few weeks. Turnover of Shanghai A shares rose to 132 billion yuan ($19.81 billion) from 104 billion yuan on Wednesday.
Cheng of Xiangcai Securities cautioned that larger gains would be muted by persistent concerns about mounting inflationary pressures and the aggressiveness of Beijing's expected policy response. He said the index would likely finish around the 2,900 mark by year-end.
Concerns that China will raise rates again soon helped to trigger a more than 5 percent drop in November, versus a gain of 12 percent in October. Analysts say recent falls have been excessive and they expect the index to stabilise around the 250-day moving average ahead of inflation data due on December 13. China would likely raise its key rates by 25 basis points this month, So said, its second increase this year as part of measures to curb price pressures.
About HK$500 billion ($64.5 billion) worth of assets managed by hedge funds was parked in Hong Kong for investing in local and regional stock markets, the Hong Kong Economic Journal said, citing Ceajer Chan, the territory's Secretary for Financial Services and the Treasury. Car makers such as Guangzhou Automobile Group Co Ltd Group climbed nearly 5.0 percent after General Motors Co and its Chinese partners reported brisk sales in November, underscoring rising demand from China's growing middle class. Coal producers retreated after media reports that Beijing had ordered a freeze on coal prices in 2011. China Shenhua Energy Co Ltd slumped 5.1 percent, the biggest percentage loser on the HSI.