China stocks rally on new economic zone, Hong Kong dips

An investor (right) gives folded lucky money to a man next to an electronic board showing stock information at a brokerage house in Shanghai.
An investor (right) gives folded lucky money to a man next to an electronic board showing stock information at a brokerage house in Shanghai.PHOTO: AFP

SHANGHAI (REUTERS) - China stocks jumped on Wednesday (April 5), the first trading day after a holiday break, as investors cheered Beijing's decision to launch a huge new economic zone in Hebei province, with shares of more than 30 related companies surging the daily limit of 10 percent.

Hong Kong stocks gained initially before edging lower, with the appetite for risk attenuated ahead of a potentially tense meeting between US President Donald Trump and Chinese President Xi Jinping later this week.

Both the CSI300 index and the Shanghai Composite Index gained 1.1 per cent at the end of the morning session, to 3,494.86 points and 3,256.67 points, respectively.

China approved a new special economic zone, described as "a thousand year project", on Saturday in the heavily polluted province of Hebei, to focus on building clusters of high-tech and innovative businesses and take over some "non-capital functions" from Beijing.

"The way they put it leaves lots of room for imagination, in terms of future investment," said Tian Weidong, an analyst at Kaiyuan Securities.

Tian identified several sectors aside from property that would benefit from the economic zone including environmental protection and infrastructure stocks. Both CSI sub-indexes were up over 2 per cent at midday.

"This time the momentum is more sustainable because it's boosted not simply by the housing market, which holds lots of uncertainty at the moment," Tian said.

Raw material stocks led the gains in a board-based rise, with the sector index up 2.8 per cent at the lunch break.

Real estate developers added 1.7 per cent, despite Beijing's ban on property sales to contain speculators after a sudden housing boom in the new economic zone.

Shares of more than 30 companies related to the new economic zone shot up by 10 per cent, the maximum allowed, including developer BBMG Corp, cement maker Tangshan Jidong Cement and harbour operator Tianjin Port .

In Hong Kong, where stocks are more exposed to global volatility than their mainland peers, the benchmark Hang Seng index dropped 0.2 per cent, to 24,215.97 points, after it made modest gains on Monday following news of the planned economic zone.

The Hong Kong China Enterprises Index lost 0.3 per cent to 10,287.92 points.

Much of the market's attention was on a landmark summit for Presidents Trump and Xi on Thursday and Friday.

It will be their first face-to-face meeting since Trump took office on Jan 20, with trade and security issues set to figure prominently.

Most sectors made modest gains by the lunch break, with services stocks leading the gains.