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Business / Markets

Strong rises as investors focused on tech stocks

(Agencies) Updated: 2015-10-21 07:58

Chinese stocks rose, sending the benchmark index to the highest level in two months, after economic data showed faster growth in the services sector and margin debt posted its longest stretch of gains since August.

The Shanghai Composite Index added 1.1 percent to 3,425.33 points, the highest close since Aug 21. The ChiNext Composite Index, whose 484 stocks represent the most dynamic parts of the economy such as technology and biotech, advanced 2.9 percent to 2,787.16 points in Shenzhen.

Siasun Robot & Automation Co climbed 4.6 percent. Hundsun Technologies Inc, which runs a financial investment trading platform known as HOMS, surged 10 percent to its highest level since Aug 17.

The ChiNext has rallied 76 percent this year, compared with a 5.9 percent gain for the large-cap Shanghai index, as the central government boosts spending in the technology industry in an effort to offset a faltering industrial sector.

The pace of growth in services quickened to 8.4 percent in the first nine months of the year, while the secondary industry-which includes manufacturing-weakened to a 6 percent expansion.

"From an increase in margin trading, some retail investors are flocking back to the market," said Zhao Bingtong, a trader at Guosen Securities Co in Shenzhen.

Traders increased holdings of Shenzhen shares purchased with borrowed money for a seventh day on Friday, as the outstanding balance climbed to 367.3 billion yuan ($58 billion), according to data compiled by Bloomberg.

The outstanding balance of margin debt on the Shanghai Stock Exchange rose 0.3 percent to 602.5 billion yuan on the same day. A fivefold surge in margin debt over the 12 months through June 12 had helped propel the Shanghai index to a more than 150 percent gain.

Hong Kong's Hang Seng China Enterprises Index slid 0.7 percent, while the Hang Seng Index fell 0.6 percent. The CSI 300 Index added 1.2 percent. Trading volumes in Shanghai were 9.5 percent above the 30-day average. Financial markets in Hong Kong will be closed on Wednesday for a public holiday.

Among the ChiNext stocks, Wangsu Science & Technology Co climbed 3.2 percent, while East Money Information Co surged 7.4 percent. Gauges of technology and telecom companies in the CSI 300 Index added more than 4 percent, the steepest advance among 10 industry groups, which all advanced as energy and materials companies rallied in afternoon trading.

PetroChina Co, the largest stock on the Shanghai Stock Exchange, gained 0.8 percent, reversing earlier losses.

The ChiNext trades at 90 times reported profits, more than five times the multiple of the Shanghai Composite Index, data compiled by Bloomberg show.

"With macro indicators not looking great, investors are speculating that the government will roll out stimulus to help technology companies," said Steve Wang, chief China economist at Reorient Financial Markets Ltd in Hong Kong. "They seem to believe it's easier to flip small stocks for quick gains."

In Hong Kong, China Mobile Ltd fell 0.6 percent before the release of third-quarter results. China Mobile's earnings may have been aided by rapid growth in 4G subscribers and data usage as well as cost reductions enforced by the government, according to Bloomberg Intelligence.

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