China stocks jump on hopes Xi will announce reforms in Shenzhen

SHANGHAI (BLOOMBERG) – China stocks climbed on Monday (Oct 12) on optimism before President Xi Jinping’s address in the southern city of Shenzhen this week.

The Hang Seng China Enterprises Index rose 3 per cent, poised for the most since July 6, as of 1:22pm in Hong Kong. Xiaomi Corp surged 6.7 per cent to be among the best performers, while shares of telecoms also advanced. The CSI 300 Index added 2.8 per cent as it trades near a five-year high.

Mr Xi is expected to shore up plans to make southern China a global technology hub during the trip. He is scheduled to deliver an address on Wednesday, the official Xinhua News Agency said. China will take cooperation between Shenzhen and Hong Kong to a “higher level,” Xinhua reported earlier, without offering more details.

“Investors are optimistic on further reforms and upgrades for Shenzhen, which are expected to drive foreign capital inflows and enhance the tech sector,” said Patrick Shum, director of investment management at Tengard Holdings Ltd.

China has been seeking to better integrate Shenzhen, the surrounding province of Guangdong and the former colonies of Hong Kong and Macau into what it calls the Greater Bay Area. The effort faces new challenges amid trade and security disputes with the US, anxiety over the new security law in Hong Kong and travel restrictions prompted by the virus pandemic.

Chinese equities listed in Hong Kong have underperformed their mainland peers in 2020, with the Hang Seng China gauge still down 12 per cent. The CSI 300 is up 17 per cent, beating most of the world’s major equity gauges. That spread last week pushed the premium of stocks on the mainland over their Hong Kong-listed peers to the highest since 2009.

Xiaomi’s gain extended its advance this year to 107 per cent. China Telecom rose more than 6 per cent on Monday, and China Unicom Hong Kong added 7 per cent, set for the most since mid-August.

Shares of firms based in Shenzhen, which has grown from a fishing village to a metropolis of more than 13 million people over the past four decades, also advanced. Software maker Shenzhen Forms Syntron Information rose by the 20 per cent daily limit, and Shenzhen Airport added 5.1 per cent.

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