Most Chinese Stocks Rise, Led by Machinery Companies; Developers Decline

Most China stocks rose as investors speculated machinery makers will sustain earnings growth as the government expands investment to poorer regions. Developers and oil companies declined.

Sany Heavy Industry Co. and Changsha Zoomlion Heavy Industry Science & Technology Development Co. advanced at least 2 percent after reporting higher profit and Goldman Sachs Group Inc. said machinery stocks may benefit from increased investment. Poly Real Estate Group Co. slid to a two-week low after the chairman of the nation’s largest developer said property prices may slump as much as 15 percent.

“Boosting regional economies is probably what the government will do next to sustain the nation’s economic growth and infrastructure-related stocks will be the biggest beneficiaries,” said Wu Kan, Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Judging from its recent tone, the government might even intensify measures to cool the property market.”

Almost three stocks advanced for every two that fell on the Shanghai Composite Index, which dropped 2.94, or 0.1 percent, to 2,639.37 at the 3 p.m. close. The CSI 300 Index slipped 0.1 percent to 2,896.19.

The Shanghai gauge has rebounded 12 percent from this year’s low on July 5 as investors speculated the government would ease property curbs and allow more lending to counter slowing growth. That’s pared this year’s loss to 19 percent, after the government increased down-payment requirements on home sales and ordered banks to set aside more deposits as reserves.

Goldman Pick

Sany Heavy added 3.7 percent to 25.95 yuan after first-half net income gained 162 percent from a year earlier to 2.88 billion yuan ($423.7 million). Changsha Zoomlion, the second- biggest maker of concrete-handling machinery, gained 2 percent to 24.84 yuan. The company said first-half net income increased 94 percent from a year earlier to 2.2 billion yuan.

Goldman Sachs Group Inc. recommended Sany Heavy as a top pick in the Chinese construction machinery industry, saying machinery stocks may benefit from railway infrastructure investment and potential policy loosening on infrastructure spending.

The central government may introduce a plan to bolster economic development in the northern province of Inner Mongolia, the 21st Century Business Herald reported last week, citing an unidentified provincial government official.

Inner Mongolia may get more policy support after national planners visited the region and investment-driven growth will continue, according to China International Capital Corp.

Drugmakers Gain

A gauge of consumer staples rose 0.5 percent in the CSI 300, the most among the 10 industry groups. Kweichow Moutai Co., the biggest producer of baijiu liquor by market value, surged 1.2 percent to 150.72 yuan. A measure of drugmakers gained 0.2 percent. Kangmei Pharmaceutical Co. added 1.7 percent to 15.44 yuan.

TPG Inc., the buyout firm run by David Bonderman and Jim Coulter, agreed to set up a 5 billion yuan fund with Shanghai’s Pudong district government to invest in the consumer, health- care, retail and financial industries.

Poly Real Estate, China’s second-largest developer by market value, led declines for real-estate companies, losing 1.5 percent to 12.31 yuan. China Vanke Co., the biggest, slid 1.9 percent to 8.49 yuan. China Merchants Property Development Co. dropped 3.1 percent to 19.76 yuan.

Vanke’s Chairman Wang Shi said home prices in the nation’s largest cities may fall 10 percent to 15 percent, the New Express Daily newspaper reported today.

Vice Premier Li Keqiang urged local officials to further consolidate the results of the government’s curbs on property speculation and to increase housing supply, according to a statement on the government website over the week-end. Construction of public housing, including low-cost and low-rent properties, must be accelerated, Li said.

Oil Stocks

Measures to rein in property speculation this year include higher down-payment and mortgage rates for multiple-home buyers and instructions for lenders to halt third-home loans in areas with “excessive” price gains.

China Petroleum & Chemical Corp., Asia’s biggest oil refiner, also known as Sinopec, dropped 0.8 percent to 8.44 yuan. Second-quarter profit fell 10 percent from a year ago to 19.68 billion yuan, according to calculations made by Bloomberg News.

Margins from processing oil slid 45 percent in the first six months as crude costs surged 84 percent. “I can see this kind of pressure on margins continuing in the third quarter if the government doesn’t increase refined oil-product prices again soon,” said Wang Aochao, an analyst at UOB-Kay Hian Ltd.

PetroChina Co., the nation’s biggest oil company, retreated 0.7 percent to 10.35 yuan. Crude oil for September delivery fell 1.3 percent to $73.46 a barrel in New York on Aug. 20, the lowest settlement price since July 6, on concern a slowing economy will cut demand for energy.

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

Bank of China Ltd. (601988 CH), the nation’s third-largest bank, fell 1.4 percent to 3.44 yuan after saying shareholders approved a plan to raise as much as 60 billion yuan in a rights offer to replenish capital.

Beijing Shougang Co. (000959 CH) jumped the 10 percent daily limit to 4.39 yuan. The steelmaker said it plans to invest 1.95 billion yuan to form an automobile joint venture, becoming the second-largest shareholder with an 18.31 percent stake.

Foshan Electrical and Lighting Co. (000541 CH), the Chinese lighting product maker, surged the maximum 10 percent to 18.26 yuan after saying said it signed an agreement with Pihsiang Machinery Manufacturing Co. to set up electric-car ventures. The two companies’ investment includes a 100 million yuan venture to produce electric-car battery materials and a 250 million yuan battery venture.

Xi’an Aero-Engine Plc (600893 CH) climbed the 10 percent daily cap to 28.39 yuan after resuming trade following a four- week suspension. The company said it plans to buy assets valued at 4.12 billion yuan from its parent and some shareholders through a stock swap.

--Zhang Shidong. Editors: Allen Wan, Richard Frost

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-7014 or szhang5@bloomberg.net

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