INSUBCONTINENT EXCLUSIVE:
HONG KONG: Stocks in China snapped a five-session losing streak to end higher on Monday, after the securities regulator said it will make it
easier for companies to buy back shares
The news lifted smaller-cap stocks, which have been under pressure with pledged share financing as the equity market tanked in October
The Shanghai Composite index closed 1.2 percent higher at 2,630.52
The blue-chip CSI300 index ended 1.2 percent firmer
The market closed lower for five straight sessions before trading commenced on Monday
CSI300's financial sector sub-index closed higher by 0.6 percent, the consumer staples sector ended down 0.4 percent, the real estate
index closed up 1.5 percent and the healthcare sub-index ended higher by 1.2 percent
Notably, the start-up board ChiNext Composite index rallied to gain 3.5 percent, helping the Shenzhen index , which is smaller than its
Shanghai counterpart, to drive up 2.5 percent
CSI300's information technology sub-index also jumped over 4 percent
The tech and small-cap rally came after the China Securities Regulatory Commission said on Friday it will simplify the procedure for listed
companies to initiative a share buyback
"This mostly benefits small and private companies," said Zhang Gang, an analyst at Central Securities in Shanghai
"There seem to be a signal that restraints on private companies are being relaxed, and that there is a real desire [from authorities] to
resolve the pledged shares issues."
Shares amounting to 10 percent of total market capitalization in China have been pledged, mostly by
small- and medium-sized companies, which have been hit by a slowing economy and the ongoing United States -China trade conflict
The Chinese government released several other similar policy signals in recent days
For example, Finance Minister Liu Kun and the State Administration of Taxation's chief have said in quick succession that China will study
and implement tax cuts to back businesses.
With the introduction of new policy measures, risk appetite is on the rise in the Chinese equity
market, analysts at Chengdu-based Chuancai Securities wrote in a note on Monday
"The A-share market is entering its latter phase of corrective rebound," said the analysts
"We will focus on high quality growth stocks in artificial intelligence, 5G, cloud computing and chipmakers, and blue chips in the
financial, real estate and pharmaceutical sectors."
Concerns subsided about risks in the financial sector after state-owned China
Securities Journal reported on Monday, citing official sources, that lending targets are not set in stone
The report came after Guo Shuqing, head of the banking and insurance regulator, said last week at least a third of big banks' new loans
should be allocated to private companies
But spring for financial companies, unlike small-caps, will not come as quickly, Zhang said
"Longer term investors with liquidity readily available are the ones buying," he said
The smaller caps are relatively cheap to these investors following the recent round of correction
Financials may rebound in the first half of 2019 "when we have a clearer picture of the recovery," Zhang added
The largest percentage gainers in the main Shanghai Composite index were Kingswood Enterprise Co Ltd and Shandong Jiangquan Industry Co Ltd
and Time Publishing and Media Co Ltd , all up by 10.1 percent.
