China stocks rise to 13-month high, as China Life’s earnings forecast brightens outlook
- The Shanghai Composite Index closed 0.6 per cent higher, capping a weekly gain of 2.6 per cent, to close at highest level since March 21, 2018
China’s stocks rose on Friday, with the benchmark reaching a 13-month high, as a profit forecast from bellwether China Life Insurance spurred optimism that corporate earnings growth will pick up.
The Shanghai Composite Index closed 0.6 per cent higher, reflecting its highest level since March 21, 2018 and capped a weekly gain of 2.6 per cent. The CSI 300 Index of big-caps gained 1.2 per cent. Hong Kong’s market was shut for an extended holiday and will reopen on Tuesday.
With China reporting growth that beat estimates this week, traders will go through earnings reports in the coming week to assess how business at publicly traded companies fared in the first three months of the year. A resilient forecast from China Life seemed to signal that a pickup in growth at the world’s second-largest economy may be filtering through to earnings.
“There are less worries about the macroeconomy now and the government still has policies in reserve, such as boosting consumption to further bolster growth,” said Ken Chen, a strategist at KGI Securities in Shanghai. “We’ll see an improvement in first-quarter earnings on a quarter-on-quarter basis and the second-quarter may improve year-on-year.”
China Life, which is among the top 10 weighted stocks on the Shanghai Composite, added 4.3 per cent to 31.38 yuan after the insurer said it expected first-quarter profit to have risen by as much as 100 per cent. A rebound in stocks and rising bond yields boosted its investment returns, China Life said in an exchange statement on Friday.
Gree Electric Appliances, China’s biggest manufacturer of air conditioners, surged 9.2 per cent to a record 65 yuan. Huatai Securities predicts the stock will rise 25 per cent to 80.96 yuan as the company is likely to sweeten dividend payouts and benefit from accumulation by foreign investors.
Visual China Group, the largest Chinese stock image provider, added 7.3 per cent to 23.02 yuan, rebounding from a recent sell-off spurred by a copyright controversy that saw the company fined 300,000 yuan (US$44,752) by internet authorities for breaching the nation’s cybersecurity law. Visual China on Friday shut its website and apologised for wrongful claims of copyright on images such as China’s national flag and the first photo of a black hole, according to Reuters.
Stocks linked to Taiwanese billionaire Terry Gou Tai-Ming dropped, as enthusiasm about his bid for Taiwan’s presidency faded. Foxconn Industrial Internet tumbled 8.8 per cent to 17.89 yuan in Shanghai, snapping a 27 per cent gain over the past three days. The company issued an exchange filing warning investors of the recent excessive gain in its share price.
Gou’s two other flagship companies trading in Taipei also dropped. Hon Hai Precision Industry dropped 3 per cent to NT$88.90 after Bank of America lowered its recommendation on the stock to neutral. Foxconn Technology slid 1.6 per cent to NT$70, extending a 1.3 per cent drop a day earlier.
