China's H Shares Jump to Highest Since March as Xi Hosts Summit

(Bloomberg) -- Chinese stocks traded in Hong Kong climbed to the highest level since March as President Xi Jinping unveiled an infrastructure spending plan and inflows from the mainland continued amid a crackdown on financial risk onshore.

The Hang Seng China Enterprises Index climbed 1.6 percent to 10,450.35 at the close, with China hosting international leaders at the Belt and Road Forum in Beijing. Xi detailed a framework for Chinese-style globalization, pledging $78 billion in financing for projects from Asia to Africa. Brokerages led the advance, with China Galaxy Securities Co. and GF Securities Co. rising by at least 3.4 percent. The gauge briefly trimmed some of their earlier gains after economic data on China’s retail sales and industrial output missed estimates.

“We have seen more Chinese money coming into Hong Kong,” said Ben Kwong, executive director at KGI Asia Ltd. in Hong Kong. “The summit is providing an excuse for investors to buy related shares like infrastructure but I think it’s very short term, and the overall mood is still a little bit tighter because of China’s deleveraging initiatives.”

H shares have largely been shielded from the impact of Beijing’s campaign to reduce leverage, rising 1.7 percent this quarter while the Shanghai Composite Index fell 4.1 percent. Mainland investors bought a net 11.7 billion yuan ($1.7 billion) of Hong Kong shares through the Shanghai stock link last week, the most this year, according to data compiled by Bloomberg.

Speaking at the summit in Beijing, Xi raised China’s pledged contribution to funds associated with a build-out of infrastructure and other investments throughout Asia, Europe and Africa. Xi’s 540 billion yuan financing plan includes 100 billion yuan for China’s Silk Road Fund, 380 billion yuan in new lending for participating nations, and 60 billion yuan in coming years for developing countries and international organizations that join the program.

Half of the top 10 gainers on the H-share index were brokerages, with Huatai Securities Co. and Haitong Securities Co. each rising at least 2.7 percent. The sector is advancing amid speculation China may support mainland markets by buying shares, said Francis Lun, the Hong Kong-based chief executive officer of Geo Securities Ltd. State-backed funds stand ready to buy shares if needed, people with direct knowledge of the matter said before the Belt and Road summit kicked off. China has a history of influencing domestic markets during important political events.

The Shanghai Composite Index advanced 0.2 percent and the Hang Seng Index climbed 0.9 percent. Materials companies rose, with Anhui Conch Cement Co. gaining 3.6 percent.

• Cyber security companies rallied as a global ransomware hacking attack was seen as positive for Chinese spending on information security. Beijing VRV Software Corp., Beijing Venustech Inc., Xiamen Meiya Pico Information Co. and NSFocus Information Technology Co. all surged by the 10% daily limit.
• Natural gas shares plummeted, with China Gas Holdings, ENN Energy Holdings, and China Resources Gas Group falling by at least 8.9%. China may impose a 6 percent cap on the annual rate of return on assets for natural gas distributors in urban areas, according to people with knowledge of the plan who asked not to be identified because the information isn’t public.
• Among infrastructure gainers, China Communications Construction Co. climbed 1.3%, while China State Construction International Holdings advanced 1.8%.
• AAC Technologies Holdings fell 4.4% to cap a three-day loss of 17%, the steepest since 2009. The stock’s rating was reduced at Credit Suisse Group and Fubon Securities after short seller Gotham City Research questioned the Apple supplier’s accounting. AAC said the report’s allegations were groundless.
• Television Broadcasts Ltd. fell 4.4% after resuming trading in Hong Kong following an April 28 suspension. Hong Kong’s Securities and Futures Commission last week said a panel review found that the broadcaster is masking the influence of Chinese media tycoon Li Ruigang and should disclose further information about its ownership to inform shareholders.

--With assistance from Philip Glamann

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net.

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Ryan Lovdahl, Emma O'Brien