China Stocks Rise as Banks Boosted by New Wealth Product Rules

(Bloomberg) -- Chinese stocks advanced as the market welcomed new guidelines on asset management products.

The Shanghai Composite Index closed up 1.1 percent, building on Friday’s 2.1 percent gain. Lenders led the advance, as regulators were seen taking a softer stance on asset management product rules to balance deleveraging with a slowing economy. Drug makers tumbled though as the government announced a probe into a vaccine scandal.

“Looser rules on the asset management industry are a big positive catalyst for stocks,” said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong. “People are worrying less about liquidity tightness, as the new rules are seen easing banks’ capital stress. Banks could be more willing to lend and that would help lower financing costs for corporates in general.”

The yuan erased an earlier advance of 0.66 percent and traded at 6.7887 versus the dollar as of 4:46 pm in Shanghai. The currency has just fallen six straight weeks. The offshore yuan slid 0.26 percent.

The dollar extended its decline from Friday, when Trump said he’s “ready to go” with additional import tariffs and that “China, the European Union and others have been manipulating their currencies and interest rates.” He also reiterated that he’s unhappy with the Federal Reserve tightening.

China’s financial markets have been battered by growing threats to its slowing economy, whether it’s the country’s deleveraging push or rising geopolitical tensions. The yuan’s slide and the $2 trillion equity rout have so far prompted limited state intervention, though China has shown it’s willing to tweak fiscal and monetary policy to support the economy if needed, according to China International Capital Corp.

Among key news affecting China’s markets today:

  • The central bank published new guidelines to supplement rules designed to regulate the country’s $15 trillion shadow-banking industry. Shares of banks and insurers had already soared on Friday on speculation that measures targeting asset-management products would be less stringent than expected.
    • Industrial & Commercial Bank of China Ltd. jumped as much as 4.4 percent in Shanghai, following a 5.8 percent rally Friday. Agricultural Bank of China Ltd., China Merchants Bank Co. and Bank of China Ltd. all rose more than 1 percent.
  • The new guidelines on the asset management industry boosted construction-related stocks, as they should help easing liquidity and help the sector get financing, said Eva Yip, a Hong Kong-based analyst at China Everbright Securities Ltd.
    • China Communications Construction Co. jumped by the 10 percent daily limit in Shanghai, while Huaxin Cement Co. rose 9.4 percent. China Railway Construction Corp. was among the top performers on the Hang Seng Composite Index, climbing 6.7 percent.
  • Changsheng Bio-Technology Co., which is at the center of a vaccine scandal, slid by the 10 percent daily limit in Shenzhen for the sixth session in a row. Several other drug makers also fell by the daily limit on the mainland, where the CSI 300 health care subgauge dropped 4.1 percent, its biggest slump since late May.
  • Aerospace and defense stocks were some of the best performers on the MSCI China Index after a report over the weekend said some military companies will be included in mixed-ownership reform. China Avionics Systems Co. led gains on the index, climbing 10 percent.

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