Chinese shares rose to the highest level in seven years in volatile trade as bets that MSCI Inc. will include mainland equities in its indexes overshadowed weaker shipments data. The ChiNext index of smaller companies tumbled.
Bank of Communications Co. climbed to its highest level in six years, pacing gains by financial stocks. CRRC Corp., formed by merging rail companies CSR Corp. and China CNR Corp., jumped 10 percent in Shanghai on its first day of trading. Shenzhen Infogem Technologies Co. slumped by the 10 percent daily limit, leading declines on the ChiNext, which sank 4.7 percent.
The Shanghai Composite Index rose 2.2 percent to 5,131.88 at the close, its highest level since January 2008, extending last week’s 8.9 percent rally. Data on Monday showed China’s exports in May declined for a third month and imports slumped for a seventh. MSCI will on Tuesday decide in New York whether to add China’s locally traded shares in its equity benchmarks.“The market is looking ahead to whether MSCI will include A shares in its emerging-market indexes and that could create some wild swings in Chinese shares,” said Bernard Aw, a Singapore-based market strategist at IG Asia Pte Ltd.
The CSI 300 Index added 2.3 percent. Hong Kong’s Hang Seng China Enterprises Index climbed 1.4 percent. The Hang Seng Index rose 0.2 percent. The Shanghai Composite’s 100-day volatility measure was near the highest level in more than five years.Stock ValueThe value of Chinese stocks is poised to reach $10 trillion after a world-beating rally added virtually the equivalent of Japan’s equities market this year. Companies with a primary listing in China were valued at $9.7 trillion at the end of trading on Friday, an increase of about $4.8 trillion since the end of 2014, according to data compiled by Bloomberg. Japan’s stock market is valued at $5 trillion, while the U.S. is at almost $25 trillion.
Bank of Communications and Bank of China Ltd. each rallied by the 10 percent daily limit, sending a gauge of financial stocks up 5.2 percent, the most among 10 industry groups on the CSI 300 index. PetroChina Co., the biggest weighting on the benchmark gauge, rose 4 percent, propelling energy shares.
“Some large caps are having a strong performance today as those names are likely to be the biggest beneficiaries of a potential inclusion of China in the MSCI index,” said Gerry Alfonso, a director at Shenwan Hongyuan Group Co. in Shanghai. “Investors seem to be building positions ahead of the announcement.”Biggest WeightingChina, through its companies listed in Hong Kong, accounts for more than 25 percent of the emerging-market benchmark. It’s the biggest weighting in the gauge, followed by South Korea’s 15 percent and 13 percent for Taiwan, data compiled by Bloomberg show. MSCI has kept China’s A shares out of its indexes due to limitations on their tradability.
The Shanghai measure has jumped 150 percent in the past 12 months, the most among major global benchmark indexes, spurred by surging participation among individual Chinese investors and record margin debt. The rally in mainland stocks has widened their premium over Hong Kong-listed peers to 40 percent, the most since 2011.
A gauge of technology companies on the CSI 300 index lost 1.9 percent Monday, paring its advance this year to 124 percent. The ChiNext fell for a third day from a record high.
“The IT sector is experiencing a correction, which looks as a technical one after the rally last week,” Alfonso said.
Trading in Shanghai was 50 percent above a 30-day average. The Shanghai Composite is valued at 25 times reported earnings, the most expensive relative to the MSCI All-Country World Index in seven years. The Shenzhen Composite Index trades at a multiple of 75. The MSCI gauge is valued at 14.4 times.
Margin traders increased holdings of shares purchased with borrowed money for a 10th day on June 5, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising to a record 1.41 trillion yuan ($227 billion).
