Chinese stocks surge on hopes of SOE mergers
SHANGHAI - Chinese stocks jumped to fresh seven-year highs today (April 27), led by heavyweights such as China Petroleum & Chemical Corp and PetroChina on expectations that Beijing will accelerate mergers among state-owned enterprises (SOEs).
SHANGHAI - Chinese stocks jumped to fresh seven-year highs today (April 27), led by heavyweights such as China Petroleum & Chemical Corp and PetroChina on expectations that Beijing will accelerate mergers among state-owned enterprises (SOEs).
China will likely cut the number of its central government-owned conglomerates to 40 through massive mergers, as Beijing looks to overhaul the vast underperforming state sector, state media reported today. Currently, there are 112 SOEs controlled by the central government.
The consolidation hopes outweighed investor concerns over the accelerated pace of initial public offerings (IPOs) and data showing weak earnings for industrial firms amid a slowing economy. Profits earned by Chinese industrial firms fell 0.4 per cent in March from a year earlier, and were down 2.7 per cent in the January to-March quarter, official data showed.
“We don’t see a slowdown in money inflows, so more liquidity will likely push stock indexes higher. Stepped-up IPO approvals won’t change the market’s upward trend,” said Mr Sun Jianbo, strategist of Galaxy Securities.
The Shanghai Composite Index closed 3 per cent higher at 4,527.40 points, with oil giants China Petroleum & Chemical and PetroChina jumping by their 10 per cent limit in Shanghai on the merger expectations. Bets on consolidation also pushed shares of China Shipbuilding, CSSC Holdings and Guangzhou Shipyard International up by more than 8 per cent. - REUTERS