China's stocks rose, pushing the benchmark to a record for a third day. Shanghai Pudong Development Bank Co. led lenders higher after it won regulatory approval to set up a fund-management arm.
``The conglomeration of China's financial industry, which will let banks, insurers and brokers expand into each other's business, is most likely to benefit banks,'' said Liu Xiaochang, a bank analyst at Huatai Securities Co. in Nanjing.
The Shanghai and Shenzhen 300 Index, which tracks yuan- denominated A shares listed on China's two exchanges, gained 16.82, or 0.7 percent, to a record 2508.13 at the close, after earlier dropping as much as 3.1 percent. The measure has surged 8.6 percent in four sessions.
The Shanghai Composite Index (SHCOMP), which tracks the bigger of China's stock exchanges, rose 0.5 percent to 2949.14. The Shenzhen Composite Index, which covers the smaller one, added 0.3 percent to 702.09.
Pudong Bank (600000), the Chinese partner of Citigroup Inc., surged 2.26 yuan, or the 10 percent daily limit, to 24.85. The lender said it won approval from China's banking regulator to start a fund with French insurer Axa SA. Pudong Bank will own 51 percent of the venture, it said.
China has allowed domestic lenders to set up funds with overseas investors since February 2005, to develop capital markets and provide another income source for banks, which get as much as 90 percent of their earnings from interest spreads.
China Merchants Bank Co., the nation's third-biggest publicly traded lender, rose 1.28 yuan, or 7.3 percent, to 18.81. China Minsheng Banking Corp., the nation's first privately controlled lender, jumped 1.04 yuan, or 10 percent, to 11.41.
Baoshan Iron & Steel Co., China's biggest steelmaker, gained 0.58 yuan, or 6.4 percent, to 9.70. The stock trades at 13 times earnings per share, compared with 37 times for the 300 index, according to data compiled by Bloomberg.
``The steel sector is relatively under-valued in the market,'' said Zheng Dong, a Beijing-based steel analyst at Guosen Securities Co. ``Investors have realized this is a good opportunity to buy steel stocks.''
Wuhan Iron & Steel Co., the third biggest, advanced 0.67 yuan, or 8.7 percent, to 8.34. The shares trade at 14 times expected earnings. Angang Steel Co. (000898), the No. 4, added 0.72 yuan, or 5.5 percent, to 13.78. The company was rated ``neutral/neutral'' in new coverage by Song Shen, a Hong Kong- based analyst at Goldman Sachs Group Inc.
Xinjiang Ba Yi Iron & Steel Co. (600581), a Xinjiang-based steelmaker, climbed 0.14 yuan, or 2.4 percent, to 6.10. The company said the board approved its plan to borrow 1.2 billion yuan ($154.3 million) from a bank to finance the purchase of fixed assets.
China Petroleum & Chemical Corp. (600028) gained after shareholders approved a plan to buy out subsidiaries.
China Petroleum, Asia's biggest oil refiner, also known as Sinopec, advanced 0.33 yuan, or 3.5 percent, to 9.73. The company said its shareholders yesterday approved a plan to issue as much as $1.3 billion worth of convertible bonds to fund a buyout of its units.
Shareholders also approved a plan to sell 10 billion yuan of bonds in mainland China to fund the construction of chemical projects, it said.
Some of the most valuable companies such as China Vanke Co. and Suning Appliance Co. declined as investors judged recent gains excessive.
``As the market rises, investor psychology changes and some will decide to get out,'' said Wu Jianfei, who manages about $438 million with CCB Principal Asset management Co. in Beijing. ``The market is supported by the fundamentals, but I do recognize that it operates on differences in perception.''
Relative Strength Index
Vanke, the nation's biggest property developer, slid 0.37 yuan, or 2.1 percent, to 16.93. Suning Appliance, China's second-biggest home appliance retailer, fell 4.01 yuan, or 5.7 percent, to 66.78. Kweichow Moutai Co., the maker of Moutai, the fiery liquor used at official banquets, fell 7.92 yuan, or 7 percent, to 105.28.
The 14-day relative strength measure for the 300 index, a moving average based on whether the gauge rose or fell, was at 82.3 yesterday. A reading above 70 signals to some investors the index is poised for a fall.
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