Beijing Hualian Hypermarket, Vanke, Tsingtao Brewery: China Equity Preview

China’s stocks rose the most in a week, led by phone and media companies, on an improved earnings outlook and the prospect yuan gains will attract more investment.

Hebei Chengde Lolo Co. climbed to a record after the beverage maker said first-quarter profit more than doubled. Phone equipment makers jumped on a report that the government will boost investment in 3G mobile-phone services and ZTE Corp. said profit gained. Huayi Brothers Media Corp. led a rally among media stocks after the government said it will give financial support to cultural companies.

“Strong expectations about a yuan revaluation and earnings figures create a favorable environment for equities,” said Wang Zheng, a fund manager at Jingxi Investment Management Co. in Shanghai. “The major negative factor so far is the concern about a further crackdown on the property industry. The real impact on the economy has yet to be gauged.”

The Shanghai Composite Index rose 26.64, or 0.9 percent, to 3,145.35 at the close. The measure dropped 0.4 percent this week on concern the government will take more measures to rein in property prices. The CSI 300 Index, which will be the basis for index-futures trading next week, gained 1 percent to 3,379.17.

The Shanghai index is down 4 percent this year, the most among the world’s 10 biggest stock markets, on concern slower credit growth will slow the expansion at the world’s third- largest economy.

Fiberhome Telecommunication Technologies Co. jumped 7.5 percent to 31.45 yuan, the biggest gain in three months. Jiangsu Hengtong Photoelectric Stock Co., a manufacturer of optical fiber and cables, advanced 6.5 percent to 36.22 yuan, while Jiangsu Yongding Co., a cable maker, surged 8.4 percent to 14.42 yuan. The telecom index in the CSI 300 rose 1.9 percent for the second-biggest gain among the 10 industry groups.

Phone Investment

China will boost its investment in 3G mobile-phone services to 400 billion yuan ($58.6 billion) by 2011, the Shanghai Securities News reported today, citing a statement jointly released by eight ministries, including the Ministry of Information Technology. China will also build 400,000 telecommunications stations and expects 150 million 3G mobile- phone users next year, the newspaper said.

ZTE, China’s second-biggest phone-equipment maker, added 2.9 percent to 42.30 yuan. The company said full-year profit rose 52 percent to 2.34 billion yuan last year as it won more orders to build networks in the world’s largest communications market.

Developers rose for the first time in four days, paring weekly losses amid concern about a property tax and further monetary policy tightening. Gemdale Corp. gained 1 percent to 13.61 yuan, trimming a weekly loss of 6.3 percent.

Rate Outlook

It’s uncertain whether a property tax in China can help curb high housing prices and its effect may be limited, Liu Shangxi, deputy director of Research Institute for Fiscal Science at the finance ministry, said in a live webcast on the Xinhua News Agency.

The central bank may raise benchmark interest rates this month to curb property price gains and inflation which may be pushed up by the drought in southern China, the 21st Century Business Herald said, citing government economist Zhu Baoliang.

A stronger yuan may help contain inflation and attract investment flows. China equity funds drew $190 million during the week ended April 7, the most since late January, EPFR Global said. The New York Times reported the Chinese government is “very close” to announcing it will change its currency policy in the “coming days.”

China may post its first trade deficit in six years after a surge in imports of commodities and consumer goods. Imports probably exceeded exports by $390 million in March after a $7.6 billion trade surplus the previous month, according to the median estimate in a Bloomberg News survey of 26 economists. The customs bureau is scheduled to release the figures tomorrow.

Beverage Producers

Chengde Lolo jumped 7.4 percent to 37.46 yuan, the highest since its listing in 1997. First-quarter probably rose 176 percent from a year earlier to about 110 million yuan on increased sales, said the company in a statement.

Tsingtao Brewery Co., the Chinese beer company founded by German settlers more than a century ago, added 1.8 percent to 35.08 yuan after saying 2009 profit rose 79 percent from a year earlier to 1.25 billion yuan on increased demand and deeper cost cuts.

Huayi Brothers jumped 8.7 percent to 68 yuan, the highest in four months. Guangdong Alpha Animation and Culture Co. rose 2.5 percent to 51.23 yuan. Anhui Xinhua Media Co. added 4.3 percent to 17.09 yuan.

The government will encourage culture and media companies to sell shares and bonds to expand, according to a People’s Bank of China statement issued yesterday.

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

China Sinoma International Engineering Co. (600970 CH) rose 6 percent to record 39.44 yuan after saying first-quarter net income may gain more than 130 percent from 107 million yuan a year earlier.

Jiangsu Hengshun Vinegar Industry Co. (600305 CH) gained 2.7 percent to 16.35 yuan, the highest since March 2008. Citic Securities Co. rated the stock “outperform” in initial coverage, saying the company’s real estate business and investment gains from a commercial property unit will add to revenue.

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