China's Stocks Extend Biggest Weekly Rally; Coal Shares Trump Developers

China's stocks rose, extending the biggest weekly advance this year, as raw-material producers gained on speculation the global economic recovery will boost demand for commodities. Developers declined.

China Shenhua Energy Co., the nation's largest coal producer, climbed 1.1 percent and Jiangxi Copper Co. increased 1.3 percent after Citic Securities Co. predicted a further rally for stocks as economic data and first-quarter corporate earnings exceed estimates. Poly Real Estate Group Co. and China Vanke Co. lost at least 1.7 percent after a series of Xinhua News Agency editorials criticized land prices and called for more taxation.

"Compared with the strength of the economy, stocks are underperformers and they deserve to be a bit more expensive," said Zhang Xiuqi, a Shanghai-based strategist at China International Fund Management Co., which oversees about $10.2 billion. "The upward trend for stocks, coupled with the growth cycle of the economy, may carry on for a while."

The Shanghai Composite Index added 0.72, or less than 0.1 percent, to 3,158.68 at the close after changing direction at least three times. It rose 3.2 percent last week, the most in three months. The CSI 300 Index dropped 0.1 percent to 3,405.15. China's markets were shut yesterday for a holiday.

The Shanghai index has erased more than half of its 10 percent loss this year as optimism about the economic recovery overshadows concerns that the central bank will raise interest rates for the first time since December 2007. The gauge is still down 3.6 percent this year, the most among the world's 10 biggest stock markets.

Citic Forecast

Citic predicted the Shanghai Composite may rise to as high as 3,400, the first time the measure reached that level since August. The rally will be led by cyclical stocks, or companies that depend on economic growth, as they report better-than- expected profit and export growth accelerates to between 22 percent and 25 percent in March, analysts led by Yu Jun wrote.

China may report on April 10 that exports rose for a fourth month in March, extending the recovery from a slump that lasted more than a year, according to the median estimate of economists surveyed by Bloomberg. Factories from China to the U.S. accelerated in March, pointing to a rebound in international trade that is contributing to a global economic recovery.

Shenhua advanced 1.1 percent to 29.85 yuan. China Coal Energy Co., the nation's second-largest coal producer, rose 1.1 percent to 12.10 yuan. Datong Coal Industry Co., the third largest, gained 2.1 percent to 40.16 yuan.

Crude oil for May delivery rose 2.1 percent to $86.62 a barrel in New York yesterday, a 17-month high. Copper added 1.3 percent and gold advanced 0.7 percent.

Commodity Stocks

Jiangxi Copper, China's biggest producer of the metal, climbed 1.3 percent to 38.07 yuan. Shandong Nanshan Aluminum Co. rose 1.5 percent to 12.05 yuan after the company said its 2009 profit rose 14 percent.

Shandong Gold Mining Co., the nation's third-largest bullion producer, added 1.5 percent to 76.08 yuan after saying its first-quarter profit likely rose more than 50 percent from the same period a year earlier as production increased.

Poly Real Estate, the second-largest developer, slid 3.6 percent to 20.67 yuan, the biggest decline since Feb. 5. Vanke, the biggest, fell 1.7 percent to 9.60 yuan. Gemdale Corp., the fourth largest, lost 3.3 percent to 14.04 yuan.

Xinhua published six editorials from March 28 and April 2, blaming local governments, speculation and corruption for soaring land and housing prices. One article proposed a bigger role for tax policies in regulating the property market.

"Developers are now facing increasing policy risks, given Xinhua's state media status and that it's playing up the issue of the property market," said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which manages about $285 million.

Property Slide

A measure tracking property stocks slid 2 percent today, the biggest among the Shanghai Composite's five industry groups and the steepest decline in a month. It had rebounded 9.9 percent in the past two months.

Property prices in 70 major Chinese cities climbed the most in almost two years in February. Premier Wen Jibao has pledged to restrain speculation in the housing market and curb land hoarding and excessive price gains in some cities, using tools including tax and credit policies.

Chongqing-based companies surged after Xinhua reported the western Chinese city plans to introduce a 1 trillion yuan ($147 billion) stimulus plan this year.

Chongqing Gangjiu Co., a transport company, jumped the 10 percent daily cap to 14.91 yuan. Chongqing Road & Bridge Co., a toll-road operator, climbed 7.8 percent to 13.66 yuan. Chongqing Wanli Holding Group Co., a battery maker, gained 3.7 percent to 15.80 yuan.

Yuan forwards jumped by the most in 15 weeks on speculation the U.S. decision to delay a report on global foreign-exchange policies will make China more willing to let the currency resume appreciation.

Moving Average

China's stocks are poised to extend gains after the FXI, an exchange-traded fund tracking the FTSE/Xinhua China 25 Index, broke through its 200-day moving average last week, according to Schaeffer's Investment Research.

"China has been lagging considerably the past few months and this could be a sign that the 'riskier' plays could be coming back into strength now. It looks like the world economy is turning a corner, Ryan Detrick, a Cincinnati-based senior technical analyst, wrote in e-mailed comments.

The following companies were among the most active in China's markets. Stock symbols are in brackets after companies' names.

CSG Holding Co. Ltd. (000012 CH) gained 3.7 percent to 23.09 yuan after the glassmaker said first-quarter profit probably surged almost fivefold from a year earlier to 290 million yuan.

Guangxi Liugong Machinery Co. (000528 CH) added 1.2 percent to 23.42 yuan after the stock was raised to "buy" from "neutral" at Goldman Sachs Group Inc., which cited expectations for earnings growth in 2010 as a result of market- share gains and margin improvements.

Zhejiang Hongda Warp Knitting Stock Holding Co. (002144 CH) climbed 3.1 percent to 16.75 yuan after the company said its first-quarter profit likely climbed by 250 percent to 300 percent from the same period a year earlier.

For Related News and Information: Chinese stocks stories: TNI CHINA STK <GO> The most-read Chinese stock stories: MNI CHS <GO> Global stocks stories: TOP STK <GO> World equity index monitor: WEI <GO> World equity valuations: WPE <GO>

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