China Bulls Out in Force as Stocks, Yuan Start Year With Gains

Chinese financial markets started the new year in celebratory mode, with the MSCI China Index extending a 12-month rally and the yuan climbing to its strongest in almost four months.

The gauge of offshore-traded shares was 2 percent higher as of 5 p.m. in Hong Kong, its biggest intraday gain since Dec. 8. Real estate developers accounted for seven of the top 10 performers, buoyed by improving contracted sales, while Sunny Optical Technology Group Co. led an advance in tech shares. Casinos slumped in the wake of disappointing Macau revenue data. The yuan strengthened beyond 6.5 per dollar for the first time since September.

The MSCI China index jumped 52 percent in 2017, led by property and technology shares, while the yuan defied bearish predictions to advance almost 7 percent against the greenback. Mainland-traded stocks had a more muted year — the Shanghai Composite Index advanced just 6.6 percent — as China’s deleveraging campaign weighed on smaller caps.

“Investors are still very positive,” said Linus Yip, strategist at First Shanghai Securities Ltd. “Consensus is expecting over 10 percent return for Hong Kong stocks this year. Many funds are restocking after returning from holidays. Earnings growth and valuation rerating will continue to send indexes higher.”

Hong Kong’s Hang Seng Index advanced 2 percent to climb above 30,000 on Tuesday, while the Hang Seng China Enterprises Index surged 3.1 percent, led by China Vanke Co. and Great Wall Motor Co.

  • A Bloomberg index tracking 22 leading Chinese builders, mostly listed in Hong Kong, jumped 6.7%. Sunac China Holdings Ltd., whose sales more than doubled last year according to data collector China Real Estate Information Corp., advanced 12%. KWG Property Holding Ltd. did even better, rising 13%.
  • Sunny Optical surged 9.2%. The shares plunged 23% last month, though still ended the year almost 200% higher
  • Chinese railway stocks rose as the government’s investment target for related fixed assets this year came in higher than expected. CRRC Corp. advanced 4% in Hong Kong, China Railway Construction Corp. rose 2.7% and China Railway Group Ltd. added 2.1%
  • Wynn Macau Ltd. dropped as much as 7.1%, its biggest tumble in more than a year, before paring the loss to 2.8%. Galaxy Entertainment Group Ltd. slid 4% and Sands China Ltd. fell 2.1%. Gaming revenue rose almost 15 percent in December to 22.7 billion patacas ($2.8 billion), missing the median estimate of a 20 percent increase in a Bloomberg survey
  • Chinese investors net bought 3.7b yuan of Hong Kong stocks via trading links, the most in three weeks, according to data compiled by Bloomberg. Hong Kong investors bought a combined 3.5b yuan of mainland stocks, the most since Dec. 8
  • The yield on 10-year government bonds rose 2 basis points to 3.92%

Source: Bloomberg