Major ETFs tracking Chinese equities inched higher after China stocks posted gains during trading on Monday. The move came as markets closely watched for any indication of what policy changes will come out of the Third Plenary session of the 18th Central Committee — a four-day meeting of the Communist Party’s planning officials that began on Saturday.
Stocks Gain, ETFs Join Them
Share in the popular iShares FTSE/Xinhua China 25 Index Fund (FXI) gained just over 1 percent Monday. Joining it with a modest bounce were the iShares MSCI Hong Kong Index Fund (EWH) climbing almost 0.5 percent, the iShares MSCI China Index Fund (MCHI) jumping just over 0.5 percent, and the SPDR S&P China Fund ($GXC) up over 0.75 percent.
Economic Data Driving Bounce
Climbing stocks appear to have received their boost from generally positive October economic numbers that may indicate an ongoing recovery for the world’s second-largest economy. Industrial production rose 10.3 percent in October, beating both last month’s 10.2 percent and the 10 percent median estimate of a Bloomberg poll of economists.
“The economic data were almost in line and the market has no catalysts or excitement now,” said Zheshang Securities strategist Wang Weijun. “There’s no news from the Communist Party’s meeting so far and investors have pretty high expectations for reform measures.”
Inflation was at 3.2 percent in October as compared to the same month last year, behind the 3.3 percent median estimate for the Bloomberg News survey of economists and the 3.5 percent rate the central government is targeting. It was an increase, though, from the 3.1 percent rate during September.
“Both CPI inflation and economic growth still remain within Beijing policy makers’ comfort zone,” said HSBC Holdings Plc’s chief China economist Qu Hongbin.
Rail Stocks, Distillery Lead the Charge
Leading gains were rail companies, with China CNR Corp. Ltd. up almost 8.25 percent and CSR Corp. Ltd. (CSRGF) jumping over 11.5 percent, after the National Business Daily reported that the state-owned China Railway Corp. will increase investment for new projects this year.
However, others saw a move to more defensive stocks ahead of any announcements the Central Committee may be gearing up for. The Sichuan Tuopai Shede Wine Co Ltd gained over 7.25 percent and the Anhui Gujing Distillery Company Limited jumped almost 6 percent.
"Unease about the Third Plenum drove investors to pick up defensive stocks, such as wine makers and hospitals," said Qian Qimin, an analyst at Shenyin Wanguo Securities.