Bloomberg News

Chinese Stocks Rise as Shanghai Index Rebounds

November 19, 2012

Chinese stocks rose, with the Shanghai Composite (SHCOMP) Index rebounding from below 2,000 for the second time in almost eight weeks, as financial and material companies rallied.

Haitong Securities Co. gained 1.7 percent, leading an advance for brokerages after the Shanghai Securities News reported that the China Securities Regulatory Commission lowered benchmarks for calculating capital requirements. Anhui Conch Cement Co. advanced the most in two weeks, pacing gains for cement producers as home prices advanced. Kweichow Moutai Co., the biggest maker of baijiu liquor, slid the most in three months on speculation retail prices will fall.

More than two stocks rose for every one that dropped in the Shanghai Composite, which climbed 0.1 percent to 2,016.98 at the close after a rally in the final hour lifted the gauge from an intraday low of 1,995.77. The index last breached 2,000 for less than two minutes during intraday trading on Sept. 26. It rallied 4.1 percent the following two days, the biggest gain among world equity indexes, on speculation the government would take steps to boost stocks.

“It was a technical rebound and short-term investors went in as stocks approached lower levels,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “However, without concrete policies, such a gain isn’t sustainable. Sentiment in the market is still very poor.”

The Shanghai index has fallen 8.7 percent this year amid concern China’s new leadership may slow efforts to reduce the government’s grip on the economy, which expanded at the slowest pace in more than three years last quarter.

Dividend Tax

The CSI 300 Index declined for a third day, losing 1 percent to 2,156.30. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong gained 0.3 percent today after U.S. President Barack Obama expressed confidence that he and Congress would reach a budget agreement. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, advanced 0.5 percent in New York on Nov. 16

The government said on Nov. 16 it will cut the dividend tax by half for individuals who hold shares for at least one year as part of efforts to encourage long-term investment and reduce speculative trading.

Haitong Securities rose 1.7 percent to 8.41 yuan. Everbright Securities Co. advanced 2.2 percent to 11.18 yuan. Hong Yuan Securities gained 2.9 percent to 16.98 yuan.

The China Securities Regulatory Commission lowered benchmarks for calculating capital requirements and expanded the scope to make proprietary investments, the Shanghai Securities News reported.

Party Congress

The Shanghai measure trades at 9.6 times estimated profit for 2012, compared with the 17.8 average multiple since Bloomberg began compiling the weekly data in 2006. Trading volumes were 31 percent lower than the 30-day average, according to data compiled by Bloomberg. Thirty-day volatility was at 12.8, compared with this year’s average of 17.1.

China completed the most important phase of a once-a-decade power transition last week, with Xi Jinping succeeding Hu Jintao as head of the ruling Communist Party. Wang Qishan, vice premier overseeing the financial sector, was named head of the party’s discipline body.

The nation’s financial reforms will continue under the new leadership even though Wang won’t be overseeing the economy and Zhou Xiaochuan will likely step down as head of the central bank, according to Kenrick Leung, fund manager at Amundi Hong Kong Ltd.

The outlook for Chinese stocks is improving as the risk of a hard landing has dissipated, said Leung, whose Greater China fund has beaten 91 percent of rivals this year according to data compiled by Bloomberg.

Leung favors Chinese technology and health-care companies, according to an e-mailed response to questions.

Home Prices

New home prices in China climbed in 35 of the 70 cities the government tracks, compared with 31 in September, according to data from the statistics bureau yesterday.

Anhui Conch Cement, the biggest maker of the building material in China, rose 2.5 percent to 15.97 yuan. Huaxin Cement Co. added 1.9 percent to 11.06 yuan.

A gauge of property stocks slid 0.5 percent. Poly Real Estate Group Co., the second biggest, retreated 1.5 percent to 10.99 yuan.

“With property prices rising, there won’t be any removal of restrictions in the near term and that’s weighing on stocks,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million.

A gauge of consumer staples producers in the CSI 300 slumped 3.5 percent, the most among 10 industry groups. The measure has fallen 11 out of 12 days and is down 12 percent this month.

Staples Producers

Kweichow Moutai lost 4.6 percent to 214.05 yuan, the most since Aug. 10. Wuliangye Yibin Co., the second-largest baijiu maker, plunged 5.8 percent to 29.11 yuan.

Prices of Moutai’s goods may decline as hoarded supplies of the company’s products return to the market, Chinese-language financial website JRJ.com reported yesterday.

“We have seen weakness in Moutai’s share price lately; that’s probably due to a decline in retail prices and concerns over inventories,” said Liu Hui, Shanghai-based analyst at CSC Securities HK Ltd.

Ping An Insurance (Group) Co. dropped 1.6 percent to 34.49 yuan in Shanghai and slid 2.2 percent to HK$58.30 in Hong Kong. HSBC Holdings Plc is in talks to sell its $9 billion stake in Ping An. The bank “is in discussions which may or may not lead to the sale of the shares,” according to a statement today.

To contact the reporter for this story: 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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