Hong Kong shares hit a six-month high on Wednesday and Shanghai's benchmark closed at its highest since December 2 following a slew of Beijing policy moves ahead of Thursday's release of China January inflation data. Outperforming the market, largely on a short squeeze, were Chinese resource-related names as well as shares of property developers and construction materials producers after the Chinese central bank said banks must provide loans to first-home buyers.
This was seen as the first clear call to support mortgage lending since the government launched a policy tightening cycle to calm the property market two years ago. The Hang Seng Index ended up 1.5 percent at 21,018.5, a tad above the bottom of a 708-point gap that opened between August 4 and 5 at 21,017.2. The China Enterprises Index rose 1.8 percent.
The Shanghai Composite Index closed up 2.4 percent at 2,347.5, above a 2,340 downward trend line, which could point to further gains. Turnover in Shanghai was at its highest since December 18, while in Hong Kong, the highest since December 19 as investors chased outperformers in a bid to lock in gains after losses of about 20 percent on benchmark indices last year.
China Petroleum & Chemical Corp (Sinopec) and CNOOC Ltd, each up about 2 percent, are trading at a 5 percent and 17 percent discount to their respective historical mean 12-month forward earnings, according to Thomson Reuters StarMine. PetroChina, which is trading at 8.7 percent more than its historical mean 12-month forward earnings, gained 2.2 percent to close at its highest since April 21 last year.
In Shanghai, PetroChina and Sinopec were among the top boosts to the benchmark, each up 1.7 percent. The HSCI-Materials Index surged 4.9 percent, while the Shanghai materials sub-index was up 4.7 percent, standout outperformers among sector gauges. Jiangxi Copper soared 6.2 percent in Hong Kong and a maximum 10 percent in Shanghai in volumes four times its 30-day average. China National Building Materials surged 8.7 percent in more than twice its 30-day average volume in Hong Kong.
China Overseas Land & Investment jumped 5.3 percent in Hong Kong, while Shanghai-listed Real Poly Estate and Shenzhen-listed China Vanke, the mainland's largest property developer by sales, each rose 2.9 percent. Chinese banks were also broadly stronger with Beijing expected to follow January inflation data on Thursday with trade on Friday and numbers on loan growth and money supply next week.
The official China Securities Journal, citing unidentified sources, reported that the sector extended about 800 billion yuan ($126.89 billion) in new loans in January, including 320 billion yuan from the "Big Four" state lenders. Traders cited a target-price revision by BNP Paribas revision for gains at Warren Buffett-backed Chinese automaker BYD Co Ltd. It surged 9.5 percent in more than triple its 30-day average volume after BNP upped its target price from HK$15.00 to HK$24.90.