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Pointing the Way: Baosteel is a clear beneficiary of state-led industry consolidation. Photo: Company

A SHARES jumped on cues from Wall Street, financial counters and steel stocks, closing up 1.54% at 2,696.25.

Meanwhile, Hong Kong’s Hang Seng benchmark index also added 1.83% to finish trading today at 21,355.77.

On a day of relatively high trading turnover reaching over 162 bln yuan, listed financial institutions shouldered the heaviest load in the afternoon session, with lenders the biggest standouts.

However, banks were not alone as resource stocks and automobiles jumped sharply following an announcement from China’s State Council -- the country’s Cabinet – that it would push forward with restructuring and consolidation of the overcrowded steel and energy sectors.

Coal mining enterprises and steelmakers, themselves heavy users of coking coal, all finished in positive territory following the Cabinet announcement.

The Shanghai Composite, the benchmark index for A-shares, tried to break through the psychologically significant 2,700-point level, but met resistance throughout the afternoon and had to settle for finishing just shy of the mark.

As a whole, banks and industries seen benefitting from state-sponsored restructuring and consolidation pulled the index higher, and analysts expect there is still more wind left in the industrial support sail.

Insurers also continued to digest recently released positive news on the policy front, namely that they would now be permitted to buy shares issued by unlisted firms and property in the latest attempt by economic regulators to grant more productive and high-yield investment options to cash-rich insurance firms.

Beijing has slowly been easing restrictions on insurers' investments these past few years.

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Reason to Smile: The insurance regulator is expanding investment options for insurers. Photo: China Life

The China Insurance Regulatory Commission (CIRC) announced last month it would permit insurers to purchase a greater variety of stocks and bonds, with all shares on the Hong Kong main board fair game.

However, insurers’ investment in unlisted shares cannot be higher than 5% of its total assets, the CIRC recently clarified on its official website, adding that investment in real estate cannot exceed 10% of the insurers’ total assets.

Among Shanghai-listed A-share firms, 501 finished up today while 312 lost ground, with mainly small to mid-caps counters and well as newer technology firms in the losing category due to less expected benefits from industry restructuring and consolidation across the broad expanse of China’s economy.

Auto stocks also benefitted from news over the weekend that the country’s economic regulator would do more to promote electric and hybrid vehicle makers.

Also moving the markets today was a general consensus from analysts that the August inflation rate will hit an annual high water mark, but that mortgage levels will not surpass July totals.

Steel stocks were also spurred on by temporary energy shortfalls in the country’s top steelmaking province – Hebei.

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Year of Living Dangerously? The benchmark Shanghai Composite Index is currently around 5% below year-earlier levels

Beginning September 3, mills in the province began facing strict electricity rations, with at least 40 steel mills and coking coal processing plants in the region forced to temporarily halt output on the new restrictions.

Investors interpreted this development as being very positive for near-term steel prices and bought shares in steelmakers accordingly.

China’s biggest listed steelmaker, Baosteel (SHA: 600019) jumped on investor interest, adding 7.06% today to close at 6.98 yuan.

Baosteel wasn’t alone as over 90% of listed steelmakers finished in positive territory today.

Energy shares also jumped on the supportive government policy for traditional industries.

Financial institutions were major winners today, with Pudong Development Bank (SHA: 600000) up 2.01% at 14.23 yuan and China Merchants Bank (SHA: 600036) adding 1.76% to 13.88 yuan.

Some brokerages gave an even more impressive performance with Guojin Securities (SHA: 600109) and Guangfa Securities both up their daily limits of 10% to 16.90 yuan and 32.66 yuan, respectively.

Meanwhile, Northeast Securities (SZA: 000686) added 6.50% to close at 23.60 yuan.

Insurers continued to digest the positive news on the investment liberalization front.

Ping An (SHA: 601318) rose 4.48% to close at 51.06 yuan while China Life (SHA: 601628) added 2.84% to 22.81 yuan.


See earlier: CHINA SHARES: Index Down 0.52% On Sluggish Growth Prospects Overseas


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JB Foods0.645-
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