Hong Kong, Shanghai shares surge on China reform plan

Hong Kong and Shanghai shares jumped on Monday after China last week unveiled details of a reform drive that includes giving private firms a greater role in the economy.

The benchmark Hang Seng Index in Hong Kong ended up 2.73 percent, or 627.91 points, at 23,660.06 on turnover of HK$112.08 billion ($14.46 billion).

Beijing on Friday released a blueprint for restructuring the world's number two economy, pledging to open up the financial sector, relax restrictions on investment and improve the country's initial public offering (IPO) system.

A document issued by the official Xinhua news agency said state firms would be made to pay larger dividends to the government, while private companies would be allowed a bigger role.

It also said leaders would further champion interest rate reform, loosen currency controls and allow farmers more room to profit from state-owned land they currently till on contract.

The plans provided some relief to traders who had been left disappointed on Tuesday when the Communist Party's "Third Plenum" political meeting ended with a communique that outlined basic ideas for reform but gave few details.

"The new leaders really delivered and promised a number of concrete changes," Hong Kong-based Societe Generale economist Yao Wei wrote in a report.

And London-based Capital Economics analysts Mark Williams and Wang Qinwei called the final plan "the most impressive statement of reform intentions that we've seen this century".

However, they emphasised words are one thing, action another. "A policy document, however weighty and well put-together, does not in itself change anything on the ground," they wrote.

Chinese insurance companies surged sharply, with Ping An closing up 9.5 percent at HK$6.00 while China Life rose 8.7 percent to HK$23.10.

Chinese shares ended 2.87 percent higher. The benchmark Shanghai Composite Index climbed 61.39 points to 2,197.22 on turnover of 143.2 billion yuan ($23.5 billion).

The rise was the biggest single-day gain for the Shanghai index since September 9, when it surged 3.39 percent.

"The reform policies led to gains in related stocks and an expansion in trading volume," Haitong Securities analyst Zhang Qi told AFP.

But, he added that "this should be just speculative buying and the market may pull back. The effect of the reform measures will emerge in the longer term," he said.

Defence stocks were higher on Beijing's decision to set up a national security agency. Beijing Aerospace Changfeng soared by its 10 percent daily limit to 15.13 yuan while Aerospace Communications Holding rose nearly 10 percent to 12.47 yuan.

Baby formula producers rose as an easing of the controversial one-child policy, with Beijing Sanyuan Foods surging 10 percent to 9.35 yuan, while pledges to ease red tap on IPOs helped brokerages.

Citic Securities advanced 10 percent to 12.71 yuan.