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Chinese stocks climbed on Wednesday and looked on track to challenge seven-year highs, energised by a surge in tech-heavy, Shenzhen-listed shares after the city’s bourse dramatically expanded the number of firms in a benchmark index.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 1.2 per cent to 4,789.55 points by the end of the morning session, while the Shanghai Composite Index gained 1.3 per cent to 4,476.09 points.
Shenzhen’s main board surged 2.7 per cent, with jumps of over 3 per cent in both the SME board for small- and medium-sized enterprises, and the ChiNext board for start-ups. All three indexes hit record highs.
The Shenzhen Stock Exchange on Wednesday sharply increased the number of stocks included in the Shenzhen SE Component Index to 500 from 40, boosting the weighting of tech companies at the expense of financial and real estate firms.
Tech-related stocks also got a boost from Beijing’s ambitious ‘Made in China 2025’ strategy published on Tuesday, which paints China’s next stage of economic ascent, from low-value manufacturing to a world of prosperity spanning space, e-commerce, green energy and bioengineering, among others.
“To those who were previously dumbfounded by the meteoric rise in tech stocks, it’s very clear now that the government is counting on this very sector to help China’s economic recovery, and transformation," said David Dai, Shanghai-based investment director at Nanhai Fund Management Co Ltd.
“Is there a bubble? Of course there is. But this how you can guide resources into high-tech companies to fund very expensive innovation.’’
Indeed, regulators are accelerating the approval of initial public offerings, many of which are launched by tech start-ups. And, capitalising on investor fervour toward this sector, the Shanghai Stock Exchange has proposed to launch a board for companies in emerging industries.
However, the Hong Kong market ended morning trade mixed.
The Hang Seng index dropped 0.2 per cent to 27,638.37 points, but the Hong Kong China Enterprises Index gained 0.5 per cent to 14,258.06.
The spotlight was on a curious tumble in Chinese solar firm Hanergy Thin Film Power Group. Shares of the company were halted from trading on Wednesday after plunging nearly 50 per cent. Hanergy officials were not immediately available for comment.
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