China’s stock index climbs out of 4-month low after June’s factory data beat forecasts

The CSI 300 Index, which tracks the biggest companies listed in Shanghai and Shenzhen, gained 0.5 per cent on Monday, adding to the 0.2 per cent gain on Friday

China stock market

Jiaxing Li

Published: 5:27pm, 1 Jul 2024

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Chinese stocks climbed from a four-month low after privately compiled data showed that factory activity in June had beaten expectations and expanded to a three-year high.

The CSI 300 Index, which tracks the biggest companies listed in Shanghai and Shenzhen, gained 0.5 per cent on Monday, adding to the 0.2 per cent gain on Friday. Hong Kong’s financial markets were closed for a holiday.

Other key Asian markets were mixed. Japan’s Nikkei 225 added 0.1 per cent, and South Korea’s Kospi added 0.2 per cent, while Australia’s S&P/ASX 200 dropped 0.2 per cent.

A private report released on Monday pointed to a better-than-expected expansion in China’s factory activity. The Caixin/S&P Global manufacturing purchasing managers’ index (PMI) rose to 51.8 in June from 51.7 in the previous month, marking the fastest clip since May 2021 and surpassing analysts’ forecasts of 51.2.

The upbeat data helped alleviate concerns following the official PMI data, which stood at 49.5 in June and was unchanged from May, according to data released by the National Bureau of Statistics (NBS) on Sunday. A reading above 50 indicates expansion of activity, while a reading below suggests contraction.

Shares of property developers advanced in mainland China, amid optimism that an upbeat economic climate would encourage buyers to return to the real estate market. Poly Developments jumped 6.2 per cent to 9.31 yuan and China Vanke rallied 5.2 per cent to 7.29 yuan, leading gains among developers. The chip designer Cambricon Technologies rallied 3.1 per cent to 204.84 yuan, Zijin Mining climbed 2.7 per cent to 18.04 yuan, while electronics product producer Foxconn Industrial Internet jumped 2.2 per cent to 28 yuan.

China’s central bank has further stepped up the rhetoric against the government bond rally, which drove yields down to a two-decade low. The People’s Bank of China said it has decided to borrow bonds to maintain the steady operation of the bond market on Monday, signalling a potential sell-down of the securities to cool off the rally.

The renewed market intervention efforts from “the national team” as indicated by a surge in net assets of the nation’s biggest exchange-traded funds has also buoyed sentiment.

A total of 51.1 billion yuan (US$7 billion) has entered the market through CSI 300 ETF in the week ended on June 28 after the Shanghai Composite Index slipped below the 3,000 psychological level, state-run Securities Times reported on Monday.

In total, A-share exchange traded funds (ETFs) have received a net inflow of over 400 billion yuan since the beginning of this year, nearing the net inflow scale for the entire year of 2023, it added.

Offsetting Monday’s gains, China’s biggest distiller giant Kweichow Moutai dropped 1.8 per cent to 1,440.38 yuan, the lowest level since October 2022. Battery giant Contemporary Amperex Technology Limited slipped 2.2 per cent to 176.07 yuan while EV maker BYD weakened 1.4 per cent to 246.80 yuan.