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SH, SZ shares both climb to 20-month high

By Cai Xiao | China Daily | Updated: 2017-08-29 08:02

Major stock indexes in Shanghai and Shenzhen bourses reached new highs on Monday, spurred by financial shares and forecast-beating results from industrial giants.

The Shanghai Composite Index closed the day with a 0.93 percent gain to 3,362.65 points, and the Shenzhen Component Index rose by 1.41 percent, both creating a 20-month high. The ChiNext startup index climbed by 1.65 percent and reached a four-month high.

A gauge of securities companies rose 6.15 percent at one point on expectations they will be the biggest beneficiary of a strong stock market recovery. Six listed brokerages such as China Galaxy Securities Co Ltd, First Capital Securities Co Ltd and Orient Securities increased by the 10 percent daily upside limit.

The revelation of State-backed fund China Securities Finance Corp boosting its holdings in some brokerages is adding to sentiment buoyed by recent market strength.

A note from Sinolink Securities Co said CSF's stake increases reflected the investment value in brokerage shares and brokers will be the primary beneficiary in the stock market as further upside is likely.

Orient Securities' first-half results released on Monday showed CSF owned 4.99 percent of the company at the end of June, up from 4.06 percent in March. Merchants Securities' report indicated a 4.64 percent CSF stake, compared with 2.67 percent stake at end-March.

Zhao Xianghuai, an analyst at Essence Securities, said valuations of listed securities firms have become very attractive as their net profits have largely improved compared with 2016 and their risk-control capabilities have become their competitiveness.

Zhao added that industry concentration of the Chinese securities market will be higher, which is another piece of good news for listed brokerages.

Profits of China's major industrial companies in July rose by 16.5 percent from a year earlier, the National Bureau of Statistics said on Sunday. The figure was 2.6 percentage points lower than in June, but still significantly on the plus side.

A research note by CITIC Securities said China's economic fundamentals remain solid, and both its domestic and external demands are rising, which should bolster growth in the coming months.

China's top coal miner China Shenhua Energy Co Ltd delivered its strongest interim results in four years, while oil giant Sinopec reported its best six-month profit since the second half of 2014, joining a slew of major State firms reporting earnings that beat their forecast.

Hong Hao, chief strategist at BOCOM International Ltd, said the solid earnings performances of large-cap shares can be among the reasons for Monday's rise.

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