13 December 2019

What’s all the excitement about a moribund market?

It’s not so bad for China’s moribund A shares after all.

After languishing near the bottom as one of Asia’s worst performers this year, the market is beginning to look like a buying opportunity for big players because of its depressed valuation.

A run of stake purchases brings home the point.

The most recent involves China Petrochemical Corp. (Sinopec Group) which snapped up 6.06 million shares of subsidiary China Petroleum and Chemical Corp. (Sinopec Corp.) (600028.CN) on Shanghai’s secondary market.

Sinopec Group is expected to continue to build its stake in Sinopec Corp. to about 2 percent in the next 12 months.

These buy-ins are feeding through to the CSI 300, a capitalization-weighted index of selected stocks traded in Shanghai and Shenzhen. The index is up 3 percent since August.

Market observers see these developments from different perspectives.

Some say major shareholders are boosting their stakes not so much to take advantage of depressed share prices as to bolster them. Others say it’s a gesture to small investors who have been hurting from the prosaic performance of the market.

In any case, these moves have added momentum to a trend of share buying involving 308 listed companies. The purchases were worth a combined 13.75 billion yuan (US$2.26 billion) in the four months to November alone, Securities Daily reports.

Sichuan Provincial Investment Group led the charge with a 1.58 billion yuan purchase of Sichuan Chuantou Energy Co. Ltd. (600674.CN) shares.

China State Construction Engineering Corp. spent 706 million yuan for an additional 203.5 million shares in subsidiary CSCEC Ltd. (601668.CN).

Major shareholders of China Coal Energy Co. Ltd. (601898.CN), Dr. Peng Telecom & Media Group Co. Ltd. (600804.CN) and Leaguer Stock Co. Ltd. (000532.CN) splashed out more than 600 million yuan to increase their respective holding.

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