Bloomberg News

China’s Stocks Rise Most in Four Weeks as Indicator Shows Growth

September 21, 2011

Sept. 21 (Bloomberg) -- China’s stocks rose, sending the benchmark index to its biggest gain in four weeks, after a gauge of economic indicators signaled growth is withstanding Europe’s debt crisis and the faltering expansion in the U.S.

PetroChina Co. led gains by commodity producers after the Conference Board said its leading indicator index rose 0.6 percent in July. Dongfang Electric Corp. jumped the most in eight months, pacing a rally by nuclear power-related companies, after the China Securities Journal said the government may resume approvals for nuclear-power projects.

“The worst period for China’s economy and inflation has passed,” said Mei Luwu, a fund manager at Lion Fund Management Co., which oversees more than $7.8 billion. “Valuations have reached a bottom, leaving limited room for further declines.”

The Shanghai Composite Index jumped 2.7 percent to 2,512.96 at the 3 p.m. close, the biggest advance since Aug. 25. Stocks on the measure trade at 11.6 times estimated profit. Valuations dropped to the lowest level on record this week, according to data compiled by Bloomberg. The CSI 300 Index rose 3 percent to 2,771.01.

The Shanghai index has slumped 11 percent in 2011 as the government increased measures to cool inflation that’s at an almost three-year high. Shares have also fallen before Sinohydro Group Ltd.’s initial public offering. The nation’s biggest builder of dams will start selling as many as 3.5 billion shares in Shanghai on Sept. 26, according to a statement to Shanghai’s stock exchange. It may be China’s biggest initial public offering in more than a year.

Conference Board

A gauge tracking energy producers on the CSI 300 rallied 4.6 percent, the most among the 10 industry groups. PetroChina, the nation’s largest oil producer, added 1.5 percent to 9.77 yuan. China Shenhua Energy Co. rose 4.9 percent to 26.59 yuan.

The Conference Board’s gauge is designed to capture prospects over the coming six months. June’s index was revised to a 0.9 percent gain from a previous 1 percent increase.

The index “signals a continuation of economic expansion through the end of this year,” Jing Sima, the board’s New York- based economist, said in a statement. “The rate of economic growth will be slower in 2011 than last year.”

The International Monetary Fund yesterday cut its forecast for global growth and said “downside risks are growing” as Europe’s debt crisis widens. The Washington-based lender also lowered its estimate for China’s expansion because of monetary tightening and a weaker outlook for exports.

The IMF estimates the Chinese economy will grow 9.5 percent this year, down from a forecast of 9.6 percent in June, and 9 percent in 2012. The fund lowered its estimate for world growth this year to 4 percent from the previous 4.3 percent forecast.

Nuclear Power

An index of industrial companies climbed 3.1 percent. Dongfang Electric surged 7.1 percent to 23.05 yuan, the biggest gain since Jan. 27. Shanghai Electric Group Co. jumped 8.5 percent to 6.13 yuan. China First Heavy Industries Co., the maker of equipment used in the mining and energy industries, rose 9.9 percent to 3.98 yuan.

New projects will be required to use reactor technology offered by Westinghouse Electric Corp. and Areva SA under China’s nuclear safety plan, which may be out to seek public opinion at the end of this year, China Securities Journal reported today, citing unidentified people.

Offshore Oil Engineering Co. and China Oilfield Services Ltd. jumped by the daily maximum of 10 percent on speculation a government development strategy will bolster earnings prospects.

Development Strategy

Offshore Oil rose 0.54 yuan to 5.90 yuan, paring this year’s losses to 27 percent. China Oilfield climbed 1.38 yuan to 15.21 yuan, paring a 40 percent slump this year.

“The gains may be related to the marine engineering development strategy issued some days earlier,” Yan Fuyin, an analyst at Great Wall Securities Co. said by phone from Shenzhen. “The shares have already dropped a lot.”

The National Development and Reform Commission published a development strategy on the marine engineering equipment industry on Sept. 16, according to the agency’s website.

The volume of shares traded in the Shanghai Composite fell to 4.6 billion yesterday, the lowest level since June 28, 2010, according to data compiled by Bloomberg.

Benchmark money-market rate climbed for a third day, the longest increase in a month, as demand for funds rose before Sinohydro’s share offering and next month’s holidays. China Securities Co., one of the leading underwriters for Sinohydro’s IPO, said a reasonable pricing range is 5.39 yuan to 6.41 yuan a share, China Business News reported today, citing a pricing report from the brokerage.

--Irene Shen. Editor: Allen Wan

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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