SHANGHAI: China’s stocks were higher on Thursday, with the blue-chip CSI300 index on track to rise for the fourth day as raw material shares powered ahead on the back of soaring metal prices.
But Hong Kong shares pulled back even as Wall Street maintained a solid run, pressured by investors in emerging markets shifting focus back to the impact of a surging U.S. dollar, and an increasingly likely Federal Reserve rate hike next month.
The CSI300 index rose 0.4 percent, to 3,488.42 points at the end of the morning session, and is set to close at the highest level in nearly 11 months, barring an afternoon correction. The Shanghai Composite Index gained 0.1 percent, to 3,244.21 points, while Shenzhen’s start-up board ChiNext fell 0.3 percent.
China’s blue-chips have outperformed growth stocks over the past month, reflecting investors’ renewed inclination toward cyclical sectors such as financials and commodities, amid signs that the economy is finding its feet.
“There’s obvious rotation into cyclical plays, out of growth stocks,” said Chang Chengwei, analyst at Hengtai Futures Co. The recent strength in commodity prices – which in turn lit a fire under raw material stocks – is the result of the government over-doing its efforts to reduce capacity, resulting in supply shortages, Chang said.
Shares in China’s major base metal producers, including Shenzhen Zhongjin Lingnan Nonfemet and Jiangxi Copper rose sharply as futures prices of copper, zinc and nickel jumped, maintaining strong upward momentum.
Although China’s yuan continued to face selling pressure, inching toward the psychological 7-per-dollar level, there’s no signs of panic in China’s stock market. Investors appeared to be interpreting the yuan’s weakness as potentially pushing up prices of imported goods, and driving up inflation.
Hong Kong followed Asian markets lower. The Hang Seng index dropped 0.4 percent, to 22,597.88 points, while the Hong Kong China Enterprises Index lost 0.2 percent, to 9,646.98.
The prospect of rapid capital flight from emerging markets is a key risk factor for investors in Asia, especially under U.S. President-elect Donald Trump’s policies. Traders are betting on a faster pace of monetary tightening by the Fed as Trump’s policies are expected to boost domestic economic growth and push inflation higher.
