Chinese Shares Eke Out Gain as Volatility Drops to Two-Year Low

(Bloomberg) -- Chinese equities edged higher after swinging between gains and losses for much of the day, with an advance in consumer stocks helping offset losses by some energy companies.

The Shanghai Composite Index added 0.1 percent, after changing direction at least seven times and falling as much as 0.3 percent. Hualan Biological Engineering Inc. rallied more than 4 percent, leading a gauge of health-care stocks higher, while a measure of energy shares declined. The Hang Seng Index in Hong Kong climbed at the close as the bourse operator reintroduced a stock closing auction on Monday.

Trading volume on the mainland was 21 percent below the 30-day average, with a measure of 10-day volatility dropping to a two-year low. The moves come after Group of 20 finance chiefs signaled escalating concern about a wave of anti-globalization sentiment. Following a two-day meeting in Chengdu city, they emphasized fiscal and structural policies to boost growth, and renewed a pledge to promote inclusiveness.

“Traders may be waiting for new economic leads on China,” said Bernard Aw, a strategist at IG Asia Pte in Singapore. “This week is very light on China data, so I expect Chinese indexes to remain in a holding pattern until next week, when we have some PMI releases.”

The National Bureau of Statistics will likely report another month of growth in industrial profits for June, Bloomberg Intelligence said before data due Wednesday. The official purchasing managers’ index probably remained at 50, the dividing line between expansion and contraction, according to a Bloomberg survey. The figures are scheduled to be released on Aug. 1.

The Shanghai Composite finished the day at 3,015.83. The Hang Seng Index and the Hang Seng China Enterprise Index reversed losses at the close, closing 0.1 percent higher and little changed, respectively. Hualan Biological advanced 4.4 percent to its highest close in more than a year.

Hong Kong Exchanges & Clearing Ltd. reintroduced the closing auction in an effort to reduce volatility and deter manipulation. HKEx abandoned its previous auction in 2009 after HSBC Holdings Plc shares plunged about 10 percent at the end of the day. The new 10-minute session, which features a random close in the final two minutes, is similar to those used by the London Stock Exchange and ASX Ltd. in Australia.

Mainland Advance

A gauge of health-care stocks added 0.9 percent on the mainland. Consumer-staples companies rose 0.5 percent, while Kweichow Moutai Co. climbed 1.1 percent. China Shenhua Energy Co. fell 1.3 percent. In Hong Kong, Dongfeng Motor Group Co. rallied 4.1 percent after Credit Suisse Group AG said its Honda JV raised its 2016 sales target by 11 percent to 500,000 units.

Developers in Shanghai rebounded from last week’s 1.9 percent slump as Poly Real Estate Group Co. advanced 1.7 percent after National Development & Reform Commission’s investment department head said that home sales volume is expected to grow at a relatively high speed.

A total of 14 companies will raise as much as 12 billion yuan ($1.8 billion) via initial public offerings, China Securities Regulatory Commission said in a statement on July 22. Seven companies will be listed on the Shanghai Stock Exchange with the others in Shenzhen, it said.

To contact the reporter on this story: Kyoungwha Kim in Hong Kong at kkim19@bloomberg.net. To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Robin Ganguly, Phani Varahabhotla

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