Chinese stocks hit eight-week high as reforms loom

Chinese stocks rose to an eight-week high as a government plan to reorganise the telecom industry raised speculation policymakers will accelerate reforms of state-owned companies to stem slowing economic growth.

The Shanghai Composite Index climbed 2.3% to 3,338.07 at yesterday’s close, the highest level since August 21.

China United Network Communicationsand China Mobile gained at least 2.7% after the government injected 231.4bn yuan (€32bn) of network assets such as base stations into a new company called China Tower.

There is “speculation regarding another wave of SOE [state-owned enterprise] reform,” said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group in Shanghai.

“The economy is slowing down and a clear, but challenging, way of supporting the economy would be to speed up SOE reform. SOE reform remains one of the most solid investment themes.”

Trading volumes in the Shanghai index were 7% higher than the 30-day average yesterday. Volumes rose to the highest in a month and margin debt expanded the most since December 8 on Monday as the rally lured investors back to the market.

Official data will, next week, show China’s economy grew 6.8% in the third quarter, the slowest pace since March 2009. The government’s target is 7%.


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