China stocks erase loss as builders get boost from spending goal

Shanghai: China stocks rose in afternoon trading to erase earlier losses as investors bet on state-backed builders after the government announced a spending plan for public works that include 5,000 kilometres of new highway next year.
The Shanghai Composite Index rose 0.4 per cent to 3,122.57 at the close, reversing a loss of as much as 1.3 per cent. China Communications Construction Co. surged 7.9 per cent for its biggest gain since Nov. 3. Other large state-owned builders of housing, ships and nuclear plants also jumped. The Shenzhen Composite Index erased an earlier loss to add 0.4 per cent.
China will spend 1.8 trillion yuan ($259 billion yuan) on highway and waterway projects next year, the Ministry of Transport said in a statement on its website. Shanghai’s benchmark index has gotten a boost in the last quarter of 2016 from China’s "old economy," namely industrial, infrastructure and state-backed firms. A gauge of mainland industrial companies has risen 11 per cent in the fourth quarter, outpacing the 3.9 per cent gain by the Shanghai Composite Index.
"The 1.8 trillion yuan plan is huge, and the actual investments could be a bit more," said He Minliang, a Taipei-based analyst at Capital Securities Corp.
Hong Kong’s financial markets are closed again on Tuesday for the holiday. The Hang Seng Index has lost 5.3 per cent in December and tumbled 7.4 per cent in the fourth quarter. The index is down 1.6 per cent this year.
The Shanghai Composite Index is headed for an annual loss of 12 per cent, its worst year since 2011. Shanghai’s benchmark will climb to 3,800 by the end of next year, according to the median forecast in a Bloomberg poll of 12 strategists and fund managers, implying a gain of more than 20 per cent.
The Shenzhen gauge is poised for a 14 per cent retreat. China State Construction Engineering Corp., China Shipbuilding Industry Co. and China Nuclear Engineering Group Co. rose more than 2.7 per cent.
President Xi Jinping is open to China’s economic growth slowing below the government’s 6.5 per cent target due to rising debt and concern about an uncertain global environment after Donald Trump’s election win, according to a person familiar with the situation.
Xi told a meeting of the Communist Party’s financial and economic leading group last week that the country doesn’t need to meet the objective if doing so creates too much risk, said the person.
Hongli Zhihui Group Co. tumbled by the daily 10 per cent limit in Shenzhen. The appliance maker forecast that its 2016 income will fall 15-40 per cent compared to a year earlier China Guangfa Bank Co. said that documents and seals for a letter claiming to guarantee bond payments by the lender were forged, in the second such episode in the nation this month.
Investors have been concerned after Sealand Securities Co. said a former employee was found to have forged a seal to conduct bond deals. Trading in Sealand Securities’ shares is suspended The Taiex Index rose 0.4 per cent on Monday.