HONG KONG (BLOOMBERG) - China's stocks rose as trading resumed after a week-long holiday and the government took steps to boost the world's second-biggest economy.
The Shanghai Composite Index climbed 2.9 per cent at 9.42am local time, led by property companies and automakers. More than 900 stocks advanced in Shanghai as trading volumes jumped 34 per cent above the 30-day average. Hong Kong's Hang Seng China Enterprises Index slipped 1.2 per cent after gaining 11 per cent during the mainland holiday.
Policymakers are increasing targeted stimulus after five interest-rate reductions since November failed to reverse an economic slowdown. The government cut a tax on passenger-vehicle purchases, while lowering a property down-payment requirement for the first time in five years. China's official purchasing managers' index rose to 49.8 in September. While the index showed manufacturing stabilising, it remains below the 50 level that indicates an expansion.
"Mainland shares are catching up with a rally in global shares," said Mr Ronald Wan, chief executive at Partners Capital International in Hong Kong. "Investors seem to be expecting more policy stimulus to come through this quarter. There's some turnaround in sentiment but investors' confidence will fade easily if the economy doesn't recover as expected and increases the market's volatility."
The CSI 300 Index advanced 3.3 per cent. Hong Kong's Hang Seng Index slid 0.7 per cent after gaining 8 per cent during China's National Day holiday.
PetroChina, which has the largest weighting in the Shanghai gauge, rose 2.9 per cent. The Hong Kong-traded shares dropped 1.9 per cent, after soaring 17 per cent over the holiday as oil prices jumped and global investors pushed back estimates for when the US will raise borrowing costs.
Traders have cut bearish wagers on the Deutsche X-trackers Harvest CSI 300 China A-Shares exchange-traded fund to a seven- month low amid expectations the latest policy efforts to stimulate the Chinese economy and the postponement of a US rate increase will help stabilise the mainland stock market.
The odds of a US Federal Reserve rate hike this month fell below 10 per cent after reports in the US last week showed the pace of hiring slowed in September and wage growth stalled. The Shanghai Composite tumbled 29 per cent last quarter, the biggest slump since 2008.
Bocom International Holdings's strategist Hao Hong recommends using any rally in China's stocks to sell as targeted stimulus is not enough to revive the bull market. He says the Shanghai gauge needs to fall a further 18 per cent to 2,500 before it is cheap enough to buy, while the average estimate from eight other strategists compiled by Bloomberg implies a 12 per cent rally by year-end.