China Stocks Climb Most Since August as Materials Firms Advance

(Bloomberg) -- Chinese stocks jumped the most in more than seven months as materials and industrial companies led gains on optimism plans for a new economic zone near Beijing will boost earnings.

The Shanghai Composite Index climbed 1.5 percent at the close after a two-day holiday. Hesteel Co. and Beijing Orient Landscape & Environment Co. both surged by the daily limit. The Shenzhen Composite Index added 1.9 percent for its biggest jump since Oct. 10. Foreign investors bought a net 1.07 billion yuan ($155.2 million) of shares through the trading link with Hong Kong.

China announced Saturday that it would develop an economic zone called Xiongan outside Beijing, prompting hordes of prospective buyers to throng to the region and driving gains in Hong Kong equities on Monday. The Shanghai benchmark has advanced 5.4 percent this year, while Chinese shares listed in Hong Kong have rallied 10 percent.

“Today is just a catch-up rally to price in China's Xiongan plan,” said Shen Zhengyang, a Shanghai-based analyst at Northeast Securities Co. “Recent measures to cool the property market will push some liquidity to the equity market so there should be some further upside for A-shares in the short term.”

China has emerged as one of the best dividend trades this year, with Chinese payout stocks outperforming the wider market more than those in the U.S. and Europe, where yield has been popular since the global financial crisis.

The ChiNext gauge rose 1.9 percent on Wednesday, its biggest surge since Jan. 20. Shenzhen Techand Ecology & Environment Co. and Beijing Originwater Technology Co. jumped by the daily limit.

"Some institutional funds are piling into technology stocks before earnings, betting that they will exceed expectations," said Zhang Gang, a strategist at Central China Securities Holdings in Shanghai.

The Hang Seng Index added 0.6 percent, while the Hang Seng China Enterprises Index climbed 0.5 percent following Monday's 0.4 percent advance. The city's financial markets were closed Tuesday for a holiday.

• Hesteel's surge, the most since January 2016, extends its advance for the year to 19%.
• Beijing Orient Landscape & Environment climbed to a record price.
• The total development funding for the Xiongan area in Hebei province in the first five years could be about 6.4 trillion yuan to 8 trillion yuan, according to a Bank of America Merrill Lynch note.
• Shares in companies including China Fortune Land Development Co. and BBMG Corp. surged by the daily limit even as they said they don't expect to have much to do in the near term with the project.
• China's central bank said in a statement that the level of liquidity in the banking system is relatively high as it skipped open market operations for an eighth day.
• China's president, Xi Jinping, will meet U.S. President Donald Trump for two days starting Thursday.
• China Unicom Hong Kong Ltd. suspended trading in Hong Kong pending an announcement, according to statement to the city's stock exchange. The company and its Shanghai-listed affiliate are said to be poised to announce mixed-ownership reform plans. The company's H shares are at the highest price since August 2015.
• Taiwan's benchmark Taiex gauge added 1.4%, the most since Nov. 10, to close at 9,949.48.

To contact the reporter on this story: Jeanny Yu in Hong Kong at jyu107@bloomberg.net.

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Philip Glamann, Teo Chian Wei