China stocks surge on state firm merger hopes
By Samuel Shen and Kazunori Takada
SHANGHAI, April 27 (Reuters) - China stocks jumped to fresh seven-year highs on Monday, led by heavyweights such as China Petroleum & Chemical Corp and PetroChina Co Ltd on expectations that Beijing will accelerate mergers among state-owned enterprises (SOEs).
China will likely cut the number of its central government-owned conglomerates to 40 through massive mergers, as Beijing looks to overhaul the vast underperforming state sector, state media reported on Monday.
Currently, there are 112 SOEs controlled by the central government.
The consolidation hopes outweighed investor concerns over the accelerated pace of initial public offerings (IPOs) and data showing weak earnings for industrial firms amid a slowing economy.
Profits earned by Chinese industrial firms fell 0.4 percent in March from a year earlier, and were down 2.7 percent in the Jan-March quarter, official data showed on Monday.
"We don't see a slowdown in money inflows, so more liquidity will likely push stock indexes higher," wrote Sun Jianbo, strategist of Galaxy Securities Co. "Stepped-up IPO approvals won't change the market's upward trend."
The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 2.2 percent to 4,807.59 points while the Shanghai Composite Index ended up 3.0 percent at 4,527.40 points.
Oil giants China Petroleum & Chemical and PetroChina jumped by their 10 percent limit in Shanghai on merger expectations. Continuación...