Chinese stocks resumed their upward momentum early on Wednesday, hitting new seven-year highs after a commentary in state media said the bull market “has just begun’’.

China’s bull run “has support from China’s grand development strategy and economic reforms’’, and blue-chip stocks are still “undervalued’’, the article, which was published on a Web site run by the official People’s Daily newspaper said. It called the surge in share prices a reflection of China’s growth potential and denied that it was a bubble.

Traders said such bullish comment from state media boosted investor confidence amid rising controversy over whether regulators consider the market too frothy, following recent government moves to expand short-selling activities.

“It gives psychological support to the market,’’ said Wu Kan, head of equities trading at Shanghai-based investment firm Shanshan Finance.

‘Obviously, regulators hope to see a steady and healthy bull market,’’ he said, pointing out that there’s enough liquidity to support further growth, as China will likely conduct further monetary easing.

The CSI300 index rose 1.8 per cent to 4,699.86 points at the end of the morning session, while the Shanghai Composite Index gained 1.8 per cent to 4,369.90 points.

Stocks in Shanghai, home to China’s blue-chip companies, currently trade at 21.8 times companies’ earnings.

Shenzhen’s start-up board ChiNext rose 2.3 per cent to record highs on Wednesday, trading at 94 times companies’ earnings.

Hong Kong stocks also rose. The Hang Seng index added 0.3 per cent to 27,928.97 points, while the Hong Kong China Enterprises Index gained 0.4 per cent to 14,590.14.

Sunac China Holdings Ltd surged nearly 10 per cent to a record high, after media reports that Kaisa Group’s chairman had no plans to cancel a deal to sell his family’s 49.3 per cent stake in the troubled Chinese developer to Sunac.

In China, stocks in sectors including new energy and cleantech jumped on signs that banks were stepping up financial support to manufacturers rushing to comply with tough state pollution standards.

For example, in the smoggy northern province of Hubei, 18 banks have agreed to lend more than 623 billion yuan ($100 billion) to steel mills to help them upgrade their technology to tackle pollution problems, potentially benefitting emissions controls and water treatment companies.

Nuclear power-related stocks also rose, after the China Nuclear Industry Association said on Wednesday that the country will approve six to eight nuclear reactors this year. In addition, eight reactors will go into commercial operation this year, the biggest annual rise for China.

Related Topics
comment COMMENT NOW