Bloomberg News

China Stocks Gain Most in Three Weeks on PMI; Anhui Conch Rises

November 01, 2012

China’s stocks rose, driving the benchmark index up by the most in three weeks, after data showed the nation’s manufacturing industry expanded for the first time since July.

Anhui Conch Cement Co. (600585) and Zoomlion Heavy Industry Science & Technology Co. gained at least 3 percent after the official Purchasing Managers’ Index rose to 50.2 in October from 49.8 in September. A number above 50 indicates expansion. China Vanke Co. (000002) and Poly Real Estate Group Co. led a gauge of developers to the highest level in three weeks as Shenyin & Wanguo Securities Co. said property sales may have improved last month.

“The PMI data brought some optimism to the market and sent signals that the economy is stabilizing,” said Dai Ming, a fund manager at Hengsheng Hongding Asset Management Co. in Shanghai, which manages $190 million.

The Shanghai Composite Index (SHCOMP) climbed 1.7 percent to 2,104.43 at the close, posting the biggest advance since Oct. 9 and capping a 1.9 percent gain this week. The CSI 300 Index rose 1.9 percent to 2,297.88. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong gained 0.7 percent. The Bloomberg China-US Equity Index slipped 0.4 percent yesterday after a two-day closure of U.S. markets due to Hurricane Sandy.

Today’s PMI report from the National Bureau of Statistics and China Federation of Logistics and Purchasing matched the median forecast of 30 economists in a Bloomberg survey. A separate PMI from HSBC Holdings Plc and Markit Economics indicated that manufacturing contracted at a slower pace in October.

The data add to expectations of a pickup in the economy this quarter after industrial production, exports and retail sales accelerated in September. Growth slowed to 7.4 percent last quarter, a three-year low.

Volumes, Volatility

“The worst is behind us already,” Joy Yang, chief Greater China economist at Mirae Asset Securities (HK) Ltd. in Hong Kong, said in an interview with Bloomberg Television.

The Shanghai gauge dropped 0.8 percent last month on concern earnings growth will decelerate. Some 948 of the index’s companies reported third-quarter profit with an average decline of 1.7 percent from a year earlier, data compiled by Bloomberg show.

The Shanghai index trades at 10 times estimated profit, compared with the 17.8 average multiple since Bloomberg began compiling the weekly data in 2006. Trading volumes of companies in the index were 23 percent higher than the 30-day average. Thirty-day volatility in the gauge was at 17.8, lower than this year’s average of 17.2.

Leadership Change

Measures of material and industrial companies in the CSI 300 advanced 2.6 percent and 1.8 percent respectively today.

Anhui Conch, China’s biggest cement maker, jumped 3.3 percent to 17.03 yuan. BBMG Corp., a cement maker, surged by the 10 percent daily limit to 6.27 yuan. Zoomlion, China’s second- biggest maker of construction equipment, climbed 3 percent to 8.64 yuan. Sany Heavy Industry Co. (600031), the nation’s largest machinery maker by market value, increased 2.3 percent to 9.19 yuan.

The ruling communist party begins a once-a-decade leadership transition with a congress set to start Nov. 8 in Beijing, where Vice President Xi Jinping will probably become head of the party. At the annual session of the legislature in March, Xi is likely to succeed Hu Jintao as president and Vice Premier Li Keqiang may succeed Wen Jiabao as premier.

“Investors are hopeful there’s going to be more measures to boost the economy after the leadership change,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “We can expect more liquidity after the congress.”

Developers Advance

A measure of 24 property stocks in the Shanghai Composite jumped 3.4 percent today, its highest close since July 25. Vanke, the nation’s biggest listed property developer, gained 3.3 percent to 8.59 yuan. Poly Real Estate Group Co. (600048), the second largest, advanced 4.4 percent to 11.60 yuan. China Merchants Property Development Co., the third biggest, climbed 2.4 percent to 23.25 yuan.

Property sales by floor area may increase about 20 from a year earlier in October because of a lower base in the same period last year, Yin Zi, a property analyst at Shenyin & Wanguo Securities, wrote in a report today.

New home prices climbed 0.17 percent to 8,768 yuan ($1,405) per square meter in October from September, a fifth month of gains, SouFun Holdings Ltd., the country’s biggest real estate website owner, said in an e-mailed statement today, based on its survey of 100 cities. The growth rate was the same as in September.

China Railway Group Ltd. (601390), the nation’s biggest construction company by total assets, added 0.7 percent to 2.73 yuan. China Railway Construction Corp., builder of more than half the nation’s rail links since 1949, rose 1.6 percent to 5.10 yuan.

Rail Investment

Investment in railways may jump 96 percent this quarter from a year earlier to 224 billion yuan should the railway ministry want to meet annual investment target, Yang Tao and Xia Tian, analysts at Citic Securities Co., wrote in a report.

The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., retreated 0.4 percent to $36.79 yesterday, paring its second consecutive monthly advance to 6.3 percent.

--Zhang Shidong, Weiyi Lim. Editors: Darren Boey, Allen Wan

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net; Weiyi Lim in Singapore at wlim26@bloomberg.net

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


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