Bloomberg News

China Stocks Climb, Capping Biggest Two-Day Rally in 10 Months

October 25, 2011

Oct. 25 (Bloomberg) -- China’s stocks rose, driving the benchmark index to its biggest two-day gain since December, as China Vanke Co.’s profit jump eased concerns the slowing economy and tighter monetary policies will spur a collapse in earnings.

Vanke, China’s biggest developer, climbed 2.9 percent after third-quarter profit surged 32 percent. Jiangxi Copper Co., the nation’s biggest producer of the metal, jumped the most in seven months on higher commodity prices. Beijing BDStar Navigation Co. led gains among satellite navigation system producers after Xinhua News Agency reported about 1 million trucks will be required to install the systems.

“Earnings are still OK and we haven’t seen a big drop in growth,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “The biggest risk comes from earnings in the fourth quarter, when we might see further slowing as a result of the government’s tightening.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, climbed 39.34 points, or 1.7 percent, to 2,409.67 at the close, extending yesterday’s 2.3 percent gain after a report showed China’s manufacturing may expand this month. The two-day, 4 percent gain was the biggest since the period ended Dec. 13. The CSI 300 Index rose 1.9 percent to 2,625.43.

The Shanghai Composite has slumped 14 percent this year after the central bank raised interest rates three times in 2011 and ordered lenders to set aside a bigger portion of their deposits to curb inflation that’s near a three-year high. It’s valued at 11.2 times estimated earnings, compared with a record low of 10.8 times on Oct. 21, according to weekly data compiled by Bloomberg.

Profit Growth

The 277 companies that have already reported third-quarter profits out of the 963 on the Shanghai Composite posted a 19 percent earnings increase in the period on average, trailing analysts’ estimates by 32 percent, according to Bloomberg data. That compared with a 26 percent average gain in second-quarter earnings, the data showed.

Vanke, the largest Chinese developer, gained 2.9 percent to 7.40 yuan. Third-quarter profit rose 32 percent from a year earlier on sales that increased 66 percent. The company’s contracted sales, based on bookings of apartments before they are built, rose 36 percent to 97 billion yuan ($15.3 billion) in the first nine months from a year earlier. Vanke will “for sure” exceed the 100 billion yuan target for sales by the end of October, it said in an e-mailed statement on Oct. 10.

Poly Real Estate Group Co., China’s second-largest developer by market value, added 4.6 percent to 9.28 yuan. Gemdale Corp. advanced 5.7 percent to 4.83 yuan.

Navigation Stocks

China, the world’s second-biggest economy, is heading toward a soft landing, speakers at the Bloomberg Link China Conference in Hong Kong said.

A hard landing is a “distant scenario,” Liu Li-Gang, head of Greater China economics at Australia & New Zealand Banking Group Ltd., said at the forum today. Consumption is “very strong” as wages jump, backing economic expansion, said John Tang, China strategist at UBS AG.

Beijing BDStar jumped by the 10 percent daily limit to 25.10 yuan, its biggest gain since Sept. 3, 2010. Beijing UniStrong Science & Technology Co. surged 7.8 percent to 26.55 yuan while Chengdu GoldTel Electronical Technology Co. climbed 5.2 percent to 30.02 yuan.

German Chancellor Angela Merkel and fellow European leaders will meet in Brussels tomorrow for a second summit in four days to find ways to enhance the firepower of a regional rescue fund.

Commodity Producers

A gauge of 48 material stocks climbed 3.2 percent today, the second most among the CSI 300. Jiangxi Copper gained 5.9 percent to 27.52 yuan, its biggest advance since March 7. Tongling Nonferrous Metals Group Co., China’s second-biggest copper producer, surged 10 percent to 20.89 yuan. Yunnan Aluminium Co., China’s fifth-largest producer of the light metal, climbed 3.7 percent to 6.43 yuan.

The Standard & Poor’s GSCI Index of 24 raw materials gained 2.4 percent as copper had its biggest two-day rally since January 2009 and oil futures in New York increased to the highest level in 11 weeks.

Pang Da Automobile Trade Co., China’s biggest car dealer by market value, lost 1.4 percent to 10.65 yuan. Swedish Automobile said it has given notice to terminate an agreement to sell a majority stake in Saab Automobile to Pang Da Auto and Zhejiang Youngman Lotus Automobile Co. and rejected their offers to buy all of the European carmaker.

--Zhang Shidong. Editors: Allen Wan, Richard Frost

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

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


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