Bloomberg News

China’s Stocks Advance, Paring Monthly Loss, as Developers Rally

November 30, 2012

China’s stocks rose, paring the biggest monthly loss since July, after valuations fell to a record low. Developers rallied with building-material makers on optimism the government won’t add further property curbs.

A gauge tracking property stocks on the Shanghai Composite Index (SHCOMP) jumped 3 percent, the most in four weeks, following official comments on the country’s urbanization. China Vanke Co. (000002) and Poly Real Estate Group Co. gained more than 3 percent. Anhui Conch Cement Co., China’s biggest cement maker, jumped 4.9 percent. Sinolink Securities Co. fell 3.4 percent, extending yesterday’s slump, after the 21st Century Business Herald reported brokerages may cut commissions.

The Shanghai Composite Index rose 0.9 percent to close at 1,980.12, the first gain in five days. The measure lost 4.3 percent this month, the biggest drop since July. The CSI 300 Index (SHSZ300) added 1.1 percent to 2,139.66. The Hang Seng China Enterprises Index (HSCEI) advanced 1.6 percent. The Bloomberg China-US 55 Index (CH55BN) added 0.4 percent in New York yesterday.

“Urbanization means that the government may expand areas of smaller second- and third-tier cities and policy makers clearly said they will count on that as the next growth engine for China,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “During the urbanization process, developers and construction-related companies are set to benefit most initially.”

Shares on the Shanghai Composite trade at an average 10.9 times reported earnings, the lowest level since at least 1997, according to data compiled by Bloomberg. The index has fallen 10 percent this year, heading for a third straight year of losses, and closed below 2,000 for the first time since 2009 on Nov. 27 as the nation’s economy slowed for seven quarters.

Developers Rally

Declines in mainland China-traded equities this year contrast with a rally for the nation’s shares traded in Hong Kong. The Hang Seng China Enterprises Index has jumped 18 percent since Sept. 5 as global investors turned more optimistic on China’s prospects.

Vanke, the nation’s biggest listed property developer, rose 3.8 percent to 8.75 yuan. Poly Real Estate, the second largest, gained 3.3 percent to 11.47 yuan. Gemdale Corp. (600383), the fourth biggest, added 5.2 percent to 5.29 yuan.

The Shanghai Stock Exchange Property Index has gained 11 percent in 2012, the only advancer among five industry groups.

China’s urbanization has great potential in coming decades and the nation is willing to start a joint research with the World Bank Group on the issue, Vice Premier Li Keqiang said in a meeting with the lender’s President Jim Yong Kim, Xinhua News Agency reported yesterday. Li is expected to replace Wen Jiabao as China’s new premier in March.

Higher Confidence

Standard & Poor’s said yesterday that Asia’s largest economy has “exceptional” growth prospects and reaffirmed its credit rating. A Bloomberg investor poll showed confidence in China’s economy is at the highest in more than a year amid optimism the new leadership headed by Xi Jinping will be better for the financial climate.

Respondents who see the Chinese economy improving or remaining stable surged to 72 percent this week, from 38 percent in September, in the quarterly global poll of investors, analysts and traders who are Bloomberg subscribers.

China is showing signs of emerging from a seven-quarter slowdown, with sectors from manufacturing to retail sales indicating a pickup since October.

Cement Producers

Anhui Conch climbed 4.9 percent to 16.48 yuan. Huaxin Cement Co., the Chinese affiliate of Holcim Ltd., added 4.4 percent to 11.60 yuan. Guangdong Tapai Group Co. advanced 5.3 percent to 7.42 yuan.

Cement prices in the southern province of Guangdong have risen by as much as 120 yuan a metric ton from the previous low, the Shanghai Securities News reported today, citing an unidentified official within cement maker Tapai Group.

The National Bureau of Statistics and China Federation of Logistics & Purchasing are due to release a manufacturing index for this month tomorrow. The Purchasing Managers’ Index probably rose to 50.8 from 50.2 in October, according to the median estimate of 25 economists in a Bloomberg survey. A reading of more than 50 indicates expansion.

Regulatory data showed the number of stock-trading accounts that made transactions last week was the lowest since at least January 2008, excluding weeks that had holidays. The value of shares traded on the Shanghai stock exchange slumped to 33.1 billion yuan ($5.3 billion) on Nov. 26, the least since November 2008 and about a third of the 102 billion-yuan daily average over the past five years.

Commission Fee

Sinolink Securities retreated 3.4 percent to 12.69 yuan, extending yesterday’s 10 percent slump. Industrial Securities Co. lost 1.3 percent to 9.16 yuan.

The 21st Century Business Herald said yesterday that the China Securities Regulatory Commission is talking with brokerages to lower commissions. The CSRC hasn’t set up a team to study reducing fees, the China Securities Journal reported today, citing an unidentified official from the regulator.

The 14-day relative strength index for the Shanghai gauge, measuring how rapidly prices have advanced or dropped during a specified time period, was at 29.5. Some investors view readings below 30 as a sign an asset is poised to rise.

Long-term investors should take advantage of poor market sentiment to accumulate A-shares, Vincent Chan and Peggy Chan, analysts Credit Suisse Group AG, wrote in a report today. The bank set a 12-month target for the Shanghai Composite at 2,400 and recommended stocks including Baoshan Iron & Steel Co. and Vanke, according to the report.

Thirty-day volatility in the Shanghai Composite was at 13.4 today, compared with this year’s average of 16.9.

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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