China stock bulls return for best gain in two months on rally in chipmakers, tame US inflation data

Martin Choi
·3-min read

Mainland China equities rose by the most in at least two month as markets in the region tracked overnight gains on Wall Street following an encouraging US inflation report. Chipmakers surged in Hong Kong on a US-China plan to fix supply shortage.

The CSI 300 Index, which tracks some of the biggest stocks in Shanghai and Shenzhen, climbed 2.5 per cent in its biggest gain since January 12. The Shanghai Composite added 2.4 per cent in a run-up not seen since October 12. The tech-heavy ChiNext gauge in Shenzhen appreciated 2.6 per cent, the best in more than a week.

Liquor distiller Kweichow Moutai rose 4 per cent to 2,048 yuan in Shanghai, while Ping An Insurance added 3.7 per cent to 86.36 yuan.

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The Hang Seng Index capped a three-day rally by adding 1.6 per cent to 29,385.61. Technology bellwethers powered gains as the Hang Seng Tech Index surged 5.2 per cent, the most since January 20. Short-video app operator Kuaishou shot up 11 per cent to HK$307.80, while delivery giant Meituan soared 8.7 per cent to HK$344.60.

Shanghai Fudan Microelectronics, which sells and designs semiconductor devices, and industry peers Hua Hong Semiconductor and state-c0ntrolled SMIC all soared by more than 10 per cent.

The China Semiconductor Industry Association, a state-backed group of 774 industry players, said on Thursday that it has set up a working group with technology companies in the US to create an avenue for communication on issues such as “export controls, supply chain security”

CSPC Pharmaceutical rallied 11 per cent. The group had an agreement with Keymed Biosciences to exclusively license and commercialise its antibody to treat severe asthma and other respiratory diseases in China, it said in an exchange filing.

China’s stock market corrected earlier this week, under the watchful eyes of the nation’s political elites as they wrapped up the “two sessions” gathering in Beijing. The pullback should be seen as a welcome adjustment as it helped shave valuation excesses and create a base for an upswing in cyclical stocks, according to a BCA Research.

There’s some room for Chinese cyclical stocks to run higher relative to defensive types, given the current ‘Goldilocks’ backdrop, its strategist Jing Sima said in a report published on March 10.

Wall Street received a boost after US consumer prices rose 0.4 per cent in February, the Labour Department said, in line with market expectations in a Reuters report. The data encouraged traders who were concerned that higher prices would prompt central bankers to dial back stimulus. 10-year Treasury yields fell about 2 basis points to 1.58 per cent while the Congress passed a US$1.9 trillion Covid-19 relief bill on Wednesday.

“While rates are only down a touch, it’s the fact that they have stopped charging ferociously higher, which seems to have been enough to calm frayed nerves, helped along with the US Congress passing the stimulus bill,” said Stephen Innes, a strategist at Axicorp. “Look for economic data to take the driver seat increasingly.”

Markets in Asia-Pacific were also bullish with Japan’s Nikkei 225 adding 0.6 per cent and 0.4 per South Korea’s Kospi rising 1.9 per cent. Australia’s S&P/ASX 200 was little changed.

Two companies debuted on the mainland markets.

Jiangsu Hanvo Safety Product, which manufactures protective gloves, soared 457 per cent to 65.25 yuan from its debut price of 54 yuan in Shenzhen, while engineering software provider ZWSOFT rose 172 per cent to 409 yuan in Shanghai from its listing price of 150.50 yuan.

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