Hong Kong shares jump on China infrastructure stimulus

Hong Kong stocks posted their largest single day gain in 10 months Sept 7 after China's announced a massive US$158 billion (RMB1 trillion) infrastructure stimulus.

Analysts reported huge gains in volume and value with infrastructure-related stocks leading the way. The Hang Seng index leapt 3.1% with volume rocketing 143% above the previous day's totals. This was the Hang Seng's biggest one-day gain in 10 months. Gains by the Shanghai composite were likewise huge and the largest in eight months.

Beijing announced 55 new infrastructure projects focused on roads, airports and seaports. Many analysts saw the US$158 billion infrastructure package as an indication China might soon begin its long-anticipated stimulus spending measures to prop up its weakening economy.

The official Xinhua news agency described the infrastructure projects announced by the top economic planner, the National Development and Reform Commission, as a "stimulus plan." Some analysts said the total amount of US$158 billion was a conservative estimate that will likely escalate.

HDRC said it had approved 25 new urban railway projects (including subways and light railways) in 18 cities across China at a cost of US$126 billion. It later announced the approval of another 30 infrastructure works, including 13 highway projects, 10 waste treatment projects and seven port or waterway projects. It gave no cost estimates for these projects, however.

"Implementation of these projects will begin in the coming months, which will cause fixed asset investment growth to rise," said Zhang Zhiwei, chief China economist for Nomura. "The impact should start to be reflected in GDP numbers in Q4 2012."

China's economy has rapidly weakened over the past year, growing just 7.6% in the second quarter of 2012, the worst performance in three years.