China Shares Post Biggest Gain in Two Years on Investment Hopes

(Bloomberg) -- Chinese equities powered higher Tuesday afternoon as the Shanghai Composite Index posted its biggest gain in more than two years. Infrastructure and property companies were some of the best performers after a report in state media raised hopes for further policy support.

The Shanghai benchmark climbed 2.7 percent, its first advance in a week, to close at 2,779 points. The enthusiasm spread to small caps too, as the ChiNext gauge added 2.7 percent, its best day since July 12. Developer China Evergrande Group Co. soared as much as 27 percent in Hong Kong, leading gains on the Hang Seng Composite Index, after issuing a positive profit alert that helped boost the whole property sector.

China Shares Post Biggest Gain in Two Years on Investment Hopes

The China Daily, citing an unidentified official at the National Development and Reform Commission, said Tuesday the government would roll out more policies to improve investment appetite, without elaborating. The China Business Journal also reported that rail investment this year may be higher than originally planned. China Railway Construction Corp. was the best performer on the large-cap CSI 300 Index, rising by the 10 percent daily limit.

The China Daily report was the main reason for the rally in stocks, according to Central China Securities strategist Zhang Gang. Sentiment was also helped by news that 14 companies have been approved to introduce new retirement products, as well as a stabilizing yuan and positive profit alerts from Evergrande and Country Garden Holdings Co., Zhang said.

The yuan rose 0.23 percent to 6.8360 per dollar as of 4:15 p.m., erasing an earlier loss of 0.29 percent as the greenback weakened. The Bloomberg Spot Dollar Index fell 0.2 percent.

Country Garden, one of the worst-performing high profile stocks in Hong Kong this year, led gains on the city’s benchmark Hang Seng Index, rising 6.8 percent. The company said Monday evening that its net income for the six months through June likely rose at least 50 percent. Evergrande, meanwhile, said first-half net profit from its core business would more than double.

Van Liu, an analyst at Guotai Junan Securities Co., said the positive profit alerts buoyed earnings optimism for the entire sector. The Shanghai Stock Exchange Property Index jumped 4.4 percent, its biggest increase since August 2016, while a gauge of developers listed in Hong Kong rose the most in more than three months.

The Hang Seng Index rose 1.5 percent Tuesday, building on Monday’s 0.5 percent advance. Developers China Resources Land Ltd. and Wharf Real Estate Investment Co. joined Country Garden in the top 10 performers, all adding at least 3 percent.

The Shanghai Composite is down 22 percent from a January high, even after Tuesday’s rally, while the benchmark’s property index has tumbled 31 percent. In Hong Kong, the Hang Seng Index is 15 percent off its peak hit in the first month of the year.

Here are some of Tuesday’s moves:

  • China Railway Stocks Jump After Report on Higher 2018 Investment
  • China Stocks Jump as Investors Take Heart From Pension Fund News
  • Macau Casinos Advance as Revenue Check Shows August Started Well
  • China Developers Advance on Earnings Optimism, Guotai Junan Says
  • Tencent, Moutai Lose More Sheen as CICC Removes From Top Picks
  • What Analysts Are Saying About Equities: China Research Digest

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