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China Market Lookahead: Stocks Seen Moving Higher

China's Shanghai Composite is expected to trade higher on Monday despite the slide in global markets on Friday. But expected economic data, as well as the imminent launch of the biggest Chinese initial public offering this year, may sway the case for caution.

Shanghai skyline
Nikada | Vetta | Getty Images
Shanghai skyline

The benchmark Shanghai Composite rose for the third day in a row on Friday, climbing 0.5 percent to 2452.01, a two-month high. The index gained 2.3 percent for the week.

Sentiment remains positive due to market reforms aimed at stimulating trade and two massive exchange-traded funds likely building positions in blue chips. All ten brokerages surveyed by China Securities Journal predict Chinese shares gaining ground this week.

Market Factors

April economic data due for release on Friday, May 11: Fixed asset investment is expected to have slowed further, may spark hopes of more pro-growth policy-tweaking.

China Post is due to launch an IPO potentially valued at $1.9 billion. The IPO received regulatory approval Friday.

China's state planning agency, NDRC, may cut fuel prices as early as Friday by around 2-3 percent as crude oil prices continue to slide.

Stocks to watch: State-Owned Companies (e.g., PetroChina, China Mobile, Baosteel)

China pledges to lift the dividend payment ratio for state-owned enterprises in a bid to level the playing field for private companies.

Brokers

China will let foreign institutions own up to 49 percent of domestic brokerages, as part of further opening of its financial sector pledged during the China-U.S. Strategic Economic Dialogue.

ICBC

ICBC informs home loan applicants it will cancel first-time home buyers' 15 percent discount on standard mortgage rates—less than a month after restarting the discount. Analysts believe it's due to tight funding.

Telco, Internet Stocks

Ministry of Information and Industry announced Friday its 12th five-year plan for the internet and communications industries, targeting annual growth of more than 25 percent for internet services, with revenue to exceed 600 billion yuan by 2015; the goal for telecommunications revenue by 2015 is over 1.5 trillion yuan.