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May 29, 2017

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China shares extend gains before weeklong break

HONG KONG--Mainland Chinese shares rose Friday ahead of an extended holiday next week.

The Shanghai Composite Index gained 1.5 percent to 2,086.17 and the Shenzhen Composite Index rose 1.9 percent to 853.83.

The index, which hit a 44-month low on Wednesday, eventually ended the week 2.93 percent higher. It extended Thursday's strong gains on lingering expectations that the government will take the upcoming weeklong public holiday as an opportunity to introduce a new round of stimulus for the slowing economy.

Metals stocks rose on the back of strong global prices. Chengtun Mining surged by its 10 percent daily limit to 12.09 yuan while Zijin Mining gained 3.89 percent to 4.01 yuan.

Property developers also rose on hopes home sales will pick up during the holiday period, a traditional peak sales period. Poly Real Estate jumped 4.06 percent to 10.76 yuan and Gemdale advanced 3.71 percent to 5.03 yuan.

Lorraine Tan, director at Standard & Poor's equity research in Singapore, said she believes the Chinese government is likely to introduce incentives to encourage domestic spending rather than making more money available for loans, as the U.S. Federal Reserve has done under its quantitative easing programs.

"Banks are indicating that they are not finding takers for loans," Tan said.

"The Chinese have a lot of flexibility ... the question is, they will only act on it if they think it will achieve something."

Investors are also upbeat about a once-in-a-decade leadership handover expected next month.

"The market may go further north as investors are making bets on the new leadership launching measures to promote economic development," Qi Li, an investment advisor at Beijing Capital Stock Investment and Consulting, told Dow Jones Newswires.

And Zheshang Securities analyst Zhang Yanbing told AFP the gains were also lifted by "speculation the securities regulator may launch new policies ... to boost market performance."

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