24 October 2016
Aerospace-related firms have drawn fresh interest in China's stock markets this week. Photo: Xinhua
Aerospace-related firms have drawn fresh interest in China's stock markets this week. Photo: Xinhua

Why A-shares have better prospects next year

As the Chinese Communist Party’s central committee began a key meeting this week, the A-share markets have been relatively quiet as people await possible policy announcements.

But transaction volumes have been robust, pointing to improved investor confidence.

Although no policies have been flagged yet at the CPC plenum, punters are betting on defense-related firms and ship and aircraft manufacturing companies, putting the sectors in the spotlight.

On Tuesday, some stocks surged their 10 percent daily limit.

The list included China Spacesat (600118.SH), CSSC Offshore & Marine Engineering Group (600685.SH), Shaanxi Aerospace Power Hi-Tech (600343.SH), China Aerospace Times Electronics (600879.SH), and North Navigation Control Technology (600435.SH).

Officials from the Ministry of Human Resources and Social Security announced at a news conference Tuesday that the pension fund will begin investing in the stock market from 2016. 

More than 2 trillion yuan of the pension fund may be injected into the market, according to ministry officials. As of the end of last year, there were nine provinces holding pension fund pools of more than 100 billion yuan.

As the money enters the stock market, equities will get a boost and mainland brokers will enjoy added business.

As for the state-owned enterprise reform theme, Tsinghua Holdings has announced a restructuring plan involving its listed subsidiaries. Under the plan, Tongfang Co. (600100.SH) will sell part of its stake in Tongfang Guoxin Electronics Co. (002049.SZ) to Unisplendour (000938.SZ).

The news drove up share prices of both Unisplendour and Tongfang.

While speculative fervor is not surprising following such news, investors should however bear in mind that they need to study carefully whether a revamp will actually help a firm in terms of its future performance.

Elsewhere, some big companies, including China Eastern Airlines (600115.SH) and Ping An Insurance (601318.SH), have posted big gains after posting good third-quarter results.

Ping An’s good results and the clearer timetable for social security fund investments should support the financial sector and the broader market going forward.

This article appeared in the Hong Kong Economic Journal on Oct. 28.

Translation by Myssie You

[Chinese version中文版]

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a columnist at the Hong Kong Economic Journal

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