Monday, March 14, 2016

Asian markets up as Chinese real estate stocks surge

Developer China Vanke reports strong earnings, plans to buy stake in Shenzen Metro

Bloomberg News
The Beijing Hills residential development by China Vanke Co. stands in Beijing, China, on Monday, Sept. 8, 2014.

Shares were up in Asia early Monday, extending a four-week rally ahead of key meetings this week by central banks in the U.S. and Japan.
Japan’s Nikkei Stock Average NIK, +1.74%   was up 2%, Hong Kong’s Hang Seng Index HSI, +0.89%   gained 0.8%. Australia’s S&P/ASX 200 XJO, +0.37%   was up 0.7% and South Korea’s Kospi SEU, +0.04%   was essentially flat.
In China, a surge in property shares led up the Shanghai Composite Index SHCOMP, +1.75%   by 1.5%. The gains came after the country’s largest developer, China Vanke Co., disclosed a plan on Sunday to buy assets in Shenzhen Metro Group, which boosted sentiment toward the entire sector.
Shares of China Vanke Co. 2202, +10.26%   soared 6.3% in Hong Kong, after the world’s largest home builder by revenue also reported strong earnings last year. The Chinese government has been loosening administrative curbs and monetary policy to encouraging housing sales in recent months.
The region’s stocks are plowing ahead, adding onto four-straight weeks of gains. The MSCI Asia Pacific Index is up about 12% in the past one month through Friday’s close, with the help of stocks in markets like South Korea’s. The S&P 500 has rallied 8.4% in that same period.
Investors are now looking to the Federal Reserve’s meeting on March 15-16. The Fed is widely expected to hold off on interest-rate increases, although stronger U.S. data recently has kept a move later in the year on the table. Signs of strength in the U.S. economy, easing worries about a global oil glut and monetary stimulus last week from the European Central Bank have boosted markets around the world recently. The Bank of Japan is also expected to keep monetary policy unchanged after announcing a move to negative interest rates in late January.
In China, shares in the property sector were up 2.3%. Poly Real Estate Group Co. Ltd. 600048, +2.57%   was up 3.2% while Gree Real Estate Co. Ltd. 600185, +2.96%   was up 3.5%.
But shares of China Vanke Co. have remained suspended in Shenzhen since December, as the firm attempts to fend off a takeover by activist investors.
Broadly in China, sentiment improved on the back of comments by China’s new stock regulator Liu Shiyu over the weekend. Liu said that it is too early to talk about an exit from the market by China Securities Financial Corp., a key vehicle tasked to prop up the market during the market meltdown last year. He also said that studying a registration-based system for initial public offerings would require a long time, fueling speculation that authorities will delay IPO reform.
The Shanghai Composite is up just 1.7% over the past month through Friday, amid ongoing worries about liquidity and a slowing domestic economy. Chinese data over the weekend showed weaker-than-expected performance from factories and retailers in the first two months of the year.
Earlier Monday, authorities guided the yuan to 6.4913, roughly stable compared to its daily “fix” on Friday. The yuan had hit its strongest level against the dollar since early December in the offshore market last week, when China’s central bank boosted the currency’s fixed rate onshore to keep up with big gains in the euro. The currency trades within a band of the “fix” onshore, and freely offshore. The currency was last at 6.49 to one U.S. dollar offshore, after reaching as strong as 6.4711 to one U.S. dollar Friday.
In Hong Kong, shares were up even after Moody’s Investors Service lowered the outlook on the city’s long-term government debt to negative from stable, saying that increasing political linkages with China are likely to weigh on Hong Kong’s institutional strength.

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