BEIJING: China stocks advanced to fresh seven-year highs on Thursday as weaker-than-expected factory activity data reinforced expectations that Beijing will roll out more stimulus measures and keep the financial system flush with cash.
The flash HSBC/Markit Purchasing Managers’ Index (PMI) showed that China’s factory activity in April contracted at its fastest pace in a year, suggesting that economic conditions are still deteriorating.
Investors also shrugged off the prospects of weaker company earnings. A Reuters survey showed that earnings growth at China-listed companies is likely to be the slowest in three years in 2015.
“No one cares about price/earnings ratios, or price/book ratios now. Investors only care about the attitude of the government, which has so far appeared tolerant (of the rise),” said Du Changchun, analyst at Northeast Securities in Shanghai.
“Upward momentum is still very strong, as money keeps flooding in. I don’t dare to forecast the market’s peak.”
The CSI300 index rose 0.2 percent to 4,751.24 points by midday, while the Shanghai Composite Index gained 0.2 percent to 4,407.72 points.
The Hang Seng index added 0.6 percent to 28,091.63 points, while the Hong Kong China Enterprises Index gained 0.4 percent to 14,722.25.
