China, HK stocks jump on signs of success in war against disorderly competition

SHANGHAI: China and Hong Kong stocks rose sharply on Monday, as investors snapped up shares of carmakers, solar energy firms and metal producers on signs that Beijing’s crackdown on price wars is starting to bear fruit.

Sentiment was also aided by the central bank’s pledge to step up policy support to aid growth.

China’s bluechip CSI300 Index jumped 1.5 percent to its highest level in 3-1/2 years, while the Shanghai Composite Index gained 0.9 percent, flirting with decade highs.

In Hong Kong, the benchmark index Hang Seng climbed 1.9 percent.

China’s industrial profits jumped 20.4 percent in August from a year earlier, reversing a 1.5 percent year-on-year decline in July, data released on Saturday showed.

“August industrial profits surge is mostly due to the base effect, but signs of early success of the ‘anti-involution’ campaign are emerging,” Hong Hao, chief investment officer of Lotus Asset Management said, referring to the government’s crackdown on over-production.

“Profit recovery will likely continue in the coming months, auguring well for further market gains.”

Goldman Sachs said that “the notable improvement of profitability in raw material sectors such as steel hints at the government’s anti-involution policies at work.”

Meanwhile, expectations of fresh stimulus rose after the People’s Bank of China said on Friday it will strengthen coordination between monetary and fiscal policies to support economic growth.

Goldman expects China to cut both interest rates and banks’ required reserve ratios in the fourth quarter.

Sectors that suffered heavily from price wars, including new energy vehicles solar energy and metal producing jumped.