China’s property developers rallied to a one-week high after the Communist Party’s Politburo vowed to stabilize the real estate market.
The Shanghai property index jumped 1.7 percent at 10:42 a.m., with Poly Real Estate Group Co. and Gemdale Corp. surging more than 3 percent after the Politburo urged reducing inventories and promoting housing reforms. The Shanghai Composite Index was little changed as trading volumes slumped 28 percent below the 30-day average for this time of day. Material producers and brokerages, Monday’s best performers when the Shanghai gauge jumped 2.5 percent, declined.
China’s benchmark gauge has rebounded 20 percent from the August low after the government took unprecedented measures to stabilize equities following a $5 trillion rout earlier in the year. Recent data showing stabilization in the Chinese economy clear a potential hurdle for the Federal Reserve to raise interest rates for the first time in almost a decade. Fed officials put off a rate increase in September because of growing risks, mainly from China, to their outlook for economic growth.
“There’s uncertainty over the global economy after a potential U.S. interest-rate increase and whether China’s economy will continue to pick up,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co., who’s keeping his stock allocation unchanged with a preference for smaller companies. "Investors are cautious. At the same time, if the market slides, some funds will bottom fish for bargains. That’s why we see a tight range for the market recently.”
Chinese data over the weekend on industrial production, retail sales and fixed-asset investment all exceeded forecasts and follow reports that show imports are moderating and consumer inflation is picking up. Fed policy makers will gather in Washington Dec. 15-16 for their last policy meeting of 2015.
The CSI 300 Index lost 0.3 percent. Hong Kong’s Hang Seng China Enterprises Index advanced 0.6 percent, while the Hang Seng Index added 0.3 percent, set to end eight days of losses. The Shanghai gauge has climbed 8.9 percent this year, while the H-shares gauge has fallen 22 percent.
With the H-shares gauge tumbling at the fastest pace among global peers, analysts are downgrading their forecasts and valuations have dropped to levels approaching those of Zambia. Investors have instead been driven away by weak economic growth and an anti-graft campaign that led to the disappearance or arrest of some of China’s most high-profile corporate executives.
"I was fooled," said Hao Hong, the chief China strategist at Bocom International Holdings Co. in Hong Kong. "Cheap is not enough."
While Hong was one of the few analysts to call both the start and peak of this year’s boom in domestic Chinese shares, his forecast for gains in Hong Kong-listed equities proved too optimistic. Hong now says the H-shares index will be stuck in a trading range.
China Vanke Co. surged 5.6 percent in Shenzhen on Tuesday. The biggest-listed developer has advanced 37 percent this year amid expectations that the government will use tax breaks to shore up the real-estate market. Poly Real Estate gained 2.7 percent on Tuesday, while China Fortune Land Development Co. jumped 7.2 percent.
A measure of material stocks in the CSI 300 lost 0.9 percent after surging 3.3 percent on Monday on speculation a cut in metal output will boost prices and the government will speed up reorganization of state-owned metal groups.
Jiangxi Copper Co. fell 2.3 percent, after gaining 6.4 percent Monday. Shenzhen Zhongjin Lingnan Nonfemet Co. declined 2.2 percent. It jumped by the 10 percent daily limit a day earlier.