Bloomberg News

China’s Stocks Rise From 14-Month Low; Commodity Producers Gain

September 20, 2011

Sept. 20 (Bloomberg) -- China stocks rose, with the benchmark index climbing from a 14-month low, as investors speculated recent declines were overdone.

PetroChina Co. rebounded from a record low and China Construction Bank Corp. advanced from its lowest close since January 2009. Anhui Conch Cement Co. paced gains for building material producers after Premier Wen Jiabao said China will continue to promote the construction of public rental housing.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, added 0.4 percent to 2,447.76 at the 3 p.m. close, rising from its lowest level since July 16, 2010. The CSI 300 Index gained 0.4 percent to 2,689.84 today.

“Recent declines were excessive, given valuation levels,” said Zhang Han, a strategist at Guotai Junan Securities Co. in Shanghai. “The A-share market is near its bottom for the year.”

The Shanghai index has slumped 13 percent in 2011, extending last year’s 14 percent plunge, as the government increased measures to cool inflation that’s at an almost three- year high. Stocks on the measure trade at 11.3 times estimated profit, after falling to the lowest level on record yesterday, according to weekly data compiled by Bloomberg and dating back to January 2006.

Stocks have also declined on speculation Europe’s debt crisis is widening. Italy’s debt rating was downgraded by Standard & Poor’s on concern weakening economic growth and a “fragile” government means the nation won’t be able to reduce the euro-region’s second-largest debt burden. Italy follows Spain, Ireland, Portugal, Cyprus and Greece as euro-region countries having their credit rating cut this year.

Record Low

PetroChina, the nation’s largest oil producer, added 0.6 percent to 9.63 yuan, after closing yesterday at its lowest level since the stock listed in 2007. China Construction Bank, the nation’s second-biggest lender, climbed 0.2 percent to 4.48 yuan. The stock has tumbled 15 percent since this year’s peak on April 18.

China may increase investments as possible stimulus plans if the economy slows “sharply,” Michael Pettis, chief strategist at Guosen Securities Co., said in an interview with Bloomberg Television today.

Anhui Conch, China’s biggest cement maker, rose 1.4 percent to 17.39 yuan, the first gain in five days. Tangshan Jidong Cement Co. advanced 3.4 percent to 15.94 yuan, the most since August 15.

China will continue to promote the construction of public rental housing, Premier Wen said in a State Council meeting. The government will let financial institutions lend to qualified local government financing vehicles for public-rental housing projects, according to an official statement.

Public Housing

Developers declined. Gemdale Corp. lost 1.6 percent to 5.56 yuan, the lowest close since May 5, 2009. China Vanke Co., the nation’s largest developer by market value, sank 0.8 percent to 7.72 yuan. Poly Real Estate Group Co. dropped 0.9 percent to 10.18 yuan, its lowest close since June 17.

The property market is under “double pressure” as developers are faced with low transactions and high inventory levels during September and October, their traditional busiest months for sales, Shanghai Securities News reported, citing China Index Academy figures.

Some Chinese cities may see home prices decline as much as 15 percent, the Hong Kong Economic Times reported, citing SRE Group Ltd. Chairman Shi Jian.

Chinese stocks may weaken further on the prospect of more initial public offerings, according to Manop Sangiambut, CLSA Asia-Pacific Markets’ head of China A-share research.

“IPOs and placements have also been a factor that has drained liquidity from the main board,” he said in a media briefing in Hong Kong yesterday. “We still believe there are many IPOs in the pipeline so that may cause market weakness.”

Sinohydro Group Ltd. plans to start selling as many as 3.5 billion shares on Sept. 26, according to a statement. China’s biggest builder of dams applied in July to raise funds for 17.3 billion yuan ($2.7 billion) of projects, China’s biggest IPO in almost a year.

--Irene Shen. Editors: Richard Frost, Matthew Oakley

To contact Bloomberg News staff for this story: Irene Shen in Shanghai at ishen4@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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