Shanghai market surges on stimulus talk

Shanghai stocks soared Wednesday on speculation that the Chinese government was considering a fiscal stimulus package, triggering a recovery across the region.

The Shanghai Composite jumped 5.9% to 2,482.64, adding on to its 1.1% advance Tuesday, while the Shenzhen All Share index soared 6% to 705.

The gains came after Chinese vice-premier Li Keqiang said Tuesday that there was a need to increase household incomes and rural consumption, to cope with a weakening global economy, according to reports.

Separately, J.P. Morgan analyst Frank Gong wrote in a report Tuesday that the country's top leadership was "carefully considering an economic stimulus package" of at least 200 billion to 400 billion yuan ($29 billion to $58 billion), which could be in the form of tax cuts and aimed at stabilizing the stock markets and supporting the development of the housing markets.

But some analysts were skeptical that the market gains could be sustained.

In Hong Kong, the Hang Seng China Enterprises climbed 3.7% to 11,106.55, while the benchmark Hang Seng Index rose 1.9% to 20,864.38.

"I think it's just a technical bounce and the trend is still downward," said Linus Yip, strategist at First Shanghai Securities in Hong Kong. "I think a stimulus package won't be able to give an instant boost to the Chinese economy, which is passing through a difficult time," he added.

The surge in Shanghai helped stocks elsewhere stage a rebound from early lows.

In Tokyo, the Nikkei 225 Average rose 0.4% to 12,910.31 in the afternoon, while the broader Topix index added 0.1% to 1,237.24. Both benchmarks ended the morning session lower.

The resource stocks-laden Sydney market advanced after crude-oil prices gained, with the S&P/ASX 200 index recently rising 1.3% to 4,929.60.

Elsewhere, South Korea's Kospi gained 0.3% to 1,546.58, New Zealand's NZX 50 index inched up 0.1% to 3,321.74, Singapore's Straits Times index advanced 0.7% to 2,747.18 and Taiwan's Taiex climbed 0.4% to 7,005.28.

Leading the gains in Shanghai, shares of Poly Real Estate Group Co. and Citic Securities surged by their daily limit of 10%, while Ping An Insurance (Group) Co. of China (601318.SH) soared 8.3%. In Shenzhen trading, shares of China's largest listed real estate company, China Vanke Co., jumped 7.3%, while Angang Steel Co. (ANGGY) rose 6.3%.

In Hong Kong, recently thrashed shares gained the most, with Guangzhou R&F Properties Co. (2777.HK) rallying 9.3% and China National Building Material Co. (3323.HK) rose 11.9%, while Tsingtao Brewery (TSGTF) jumped 8.3%.

But shares of Chinese power utilities dropped, reversing gains from the previous session, when they advanced on reports the government had allowed them to raise tariffs on electricity sold to power grids. Shares of Huaneng Power International fell 5.4% and Datang International Power Generation Co. slipped 0.2% recently.

In a note to clients, Morgan Stanley analysts wrote Wednesday that the hike was "due to the sharp deteriorating operating environment" of power producers due to high costs and said the increase "wasn't sufficient to offset the increase in coal costs" between July and August.