Shanghai stocks rise on robust factory activity data, Xi's speech; blue-chips slip

SHANGHAI: Shanghai stocks rose on Wednesday, encouraged by robust factory activity data and President Xi Jinping reiterating a promise of “high-quality development”, while blue-chips slipped, reflecting lingering concerns over the economy’s uneven growth.

The Shanghai Composite Index closed up 0.4% after hitting a one-week high. The blue-chip index CSI300 gave up morning gains to end 0.4% lower.

SSEC is the most tracked benchmark for onshore Chinese shares, while the CSI300 covers large-caps in both Shanghai and Shenzhen.

Hong Kong market was closed for a public holiday.

China’s manufacturing sector expanded for a seventh straight month in June, completing its strongest quarter since late 2020, a business survey showed on Wednesday.

President Xi pledged on Wednesday to “steadily promote high-quality development”, which refers to sustainable, innovation-driven growth.

Tech shares surged, continuing their outperformance against traditional sector stocks and mirroring the real economy’s two-speed growth, which stirs concerns.

Goldman Sachs said in a note that in meetings with Chinese investors over the past week, “local clients appeared more cautious on China’s near-term growth momentum”, reflecting “a more bifurcated growth mix”.

An index tracking chipmaking equipment and materials jumped as much as 6% on Wednesday to record highs.

Innovative sectors, including biotech and software, also gained.

Some traditional sectors, including agriculture and property, climbed.

But market strength was partly offset by sharp drops in sectors ranging from new energy and AI to consumer electronics.

Some investors remain optimistic over the long run.

“We see a lot of growth on offer at better than reasonable prices in China across sectors. So, this is not just a defensive allocation of capital for us,” said Vikas Pershad, portfolio manager for Asian Equities at M&G Investments.

“We’ll see in a few years if the earnings and valuations have justified that allocation of capital. But we think it does, which is why we’ve done that.”