China’s stocks rallied, driving the benchmark index’s biggest weekly advance since October 2011, after the nation’s manufacturing expanded last month. Financial and industrial companies led the gains.
The Shanghai Composite Index (SHCOMP) climbed 1.4 percent to 2,419.02 at the close, with the gauge’s 100-day historical volatility jumping to the highest level since June 2012. It fell as much as 0.7 percent after the release of a government report showing manufacturing grew slower than expected. The measure rebounded after the purchasing managers’ index from HSBC Holdings Plc and Markit Economics showed a rise to a two-year high, which Principal Global Investors said better reflected the economy. Bank of America Corp. said the official PMI data was distorted by this month’s Chinese new year holiday.
“Stocks went down at first on the worse-than-expected official PMI, then investors started to ponder if it’s just a seasonal effect,” Li Jun, a strategist at Central China Securities Co., said from Shanghai. “When the HSBC PMI was better than expected, worry was removed, so stocks went up.”
Sany Heavy Industry Co. surged 4.3 percent, leading a gauge of industrial stocks to the biggest advance among groups in the CSI 300 Index after financial companies. Haitong Securities Co. jumped 5.4 percent, extending this week’s rally to 23 percent, on the prospect of industry reforms and increased share trading boosting earnings.
The CSI 300 rose 2.1 percent to 2,743.32, the highest since Nov. 2011. The Hang Seng China Enterprises Index (HSCEI) added 0.3 percent. The Bloomberg China-US 55 Index (CH55BN) decreased 0.1 percent in New York yesterday.
The Shanghai gauge rallied 5.1 percent in January, the best performance among the biggest emerging markets, on signs economic growth is accelerating and amid speculation China’s new leaders will promote urban development.
The Shanghai index climbed 23 percent from a three-year low on Dec. 3, signaling a bull market to some investors. The gauge is valued at 13.3 times reported profit, the highest level since Sept. 2011, data compiled by Bloomberg show. That’s still lower than the measure’s seven-year average multiple of 21.4 times, the data show. The index changed directions at least nine times with trading volumes 11 percent higher than the 30-day average.
The expansion in manufacturing validates the nation’s reluctance to add to policy stimulus amid increasing inflation concern. The PMI Index was 50.4 in January compared with 50.6 in December, the National Bureau of Statistics and China Federation of Logistics and Purchasing said. The HSBC gauge covering fewer businesses rose to 52.3 from 51.5. Readings above 50 indicate expansion.
“I take more positive out of the HSBC PMI because it represents a much better outlook in the medium and small enterprise sector,” said Binay Chandgothia, a Hong Kong-based portfolio manager at Principal Global, which oversees more than $280 billion.
Sany Heavy, the biggest maker of construction machinery, rose 4.3 percent to 12 yuan. Zoomlion Heavy Industry Science & Technology Co., the second largest, jumped 5 percent to 9.71 yuan.
China’s stocks “won’t significantly turn bearish as the PMI is a quite inaccurate barometer around the Chinese New Year holiday,” Bank of America’s China economist Ting Lu wrote in a report. The economy will be in a “sweet spot in the near term” as recent data such as industrial profits point to “impressive recovery,” Lu wrote. China’s markets will be closed for a week from Feb. 11 for the Lunar New Year holidays.
Chinese new home prices rose 1 percent in January, the biggest gain since January 2011, SouFun Holdings Ltd. (SFUN:US), the country’s biggest real estate website owner, said in a statement, based on its survey of 100 cities. Worries of more policy tightening will increase if prices rise too fast, Alan Jin, a Hong Kong-based analyst at Mizuho Securities Asia Ltd., wrote in an e-mailed reply to Bloomberg News.
Haitong Securities, the nation’s second-biggest listed brokerage, advanced for a fifth day to the highest level since November 2010. Citic Securities Co., the largest, gained 3.7 percent to 15.74 yuan. Founder Securities Co., based in Beijing, soared 10 percent to 6.37 yuan.
Chinese brokerages may post 13.7 percent growth in net profit this year, bolstered by a jump in share-trading volumes and rising interest in margin financing as well as short selling, according to Guosen Securities.
The outstanding amount of margin financing and short selling reached 111 billion yuan as of Jan. 25, compared with 89.5 billion yuan at the start of year, Guosen said in a note. It expects the figure to rise no less than 26 percent in January, the fastest growth rate since 2011, on lower entry barriers for investors, improving sentiment and a jump in number of shares eligible for margin financing and short selling.
-- Editors: Allen Wan, Shiyin Chen
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