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China Stocks Rise on U.S. Housing Starts, Commodity Prices

China’s stocks rose, spurring a rebound for the benchmark index from the steepest drop in two months, as a jump in U.S. housing starts bolstered the outlook for the global economy and commodity prices advanced.

Jiangxi Copper Co. and PetroChina Co., the biggest copper and energy producers, led gains for material companies after U.S. March housing starts beat estimates. SAIC Motor Corp., the largest car company, climbed for the first time in four days as the Bosera Theme Sector Fund, the fourth-best performer last quarter out of 735 China funds, said automakers remain cheap. Xinjiang Goldwind Science & Technology Co., a maker of wind turbines, slid 6.7 percent after first-quarter profit dropped.

The Shanghai Composite Index advanced 8 points, or 0.3 percent, to 3,007.04 at the 3 p.m. close. The measure slid 1.9 percent yesterday, the most since Feb. 22, after Standard & Poor’s Ratings Service cut its outlook on U.S. credit. The CSI 300 Index (SHSZ300) was little changed at 3,295.76 today.

“The plunge yesterday was a short-term over-reaction,” said Wang Cheng, a strategist at Guotai Junan Securities Co. in Shanghai. “The outlook for the global economy is still positive for the mid-term. Companies with low valuations are a favorite of investors.”

The Shanghai Composite Index has gained 7.1 percent this year, the best performer among the biggest Asian markets, as optimism about growth in the world’s second-largest economy and corporate earnings outweighed measures to cool inflation. The central bank has announced 10 reserve-requirement ratio increases since the start of 2010 and raised interest rates four times.

‘Moderating’ Economy

China’s economic activity is “moderating” as government tightening measures take effect, the New York-based Conference Board said. A leading economic indicator for China rose 0.3 percent to 155.3 in February, the research organization said today, giving a preliminary reading.

Asian stock markets rose after Commerce Department figures showed that work began on 549,000 houses at an annual pace, up 7.2 percent from the prior month and exceeding the 520,000 median forecast of economists surveyed by Bloomberg News. Starts fell 19 percent in February to the lowest level in almost two years.

Jiangxi Copper jumped 1.4 percent to 38.23 yuan. Yunnan Copper Industry Co. (000878) added 1.3 percent to 25.42 yuan. PetroChina gained 0.3 percent to 11.90 yuan.

Commodity Prices

The London Metal Exchange Index of six metals including copper and aluminum increased 1 percent, the biggest gain in almost two weeks. Three-month-delivery copper on the London Metal Exchange rose as much as 1.3 percent to $9,464.75 a metric ton and was at $9,426.5 by 1:45 p.m. Singapore time.

Crude oil for June delivery rose as much as 92 cents to $109.20 a barrel in electronic trading on the New York Mercantile Exchange. It was at $109.11 at 12:49 p.m. Singapore time.

China Gezhouba Group Co., an engineering construction company, surged by 10 percent to 13.12 yuan. The company announced a plan for its parent to restructure with units of China State Grid Corp., China Southern Power Grid Co. and China Power Engineering Consulting Group Corp., and form a new company.

"The announcement prompted speculation that the listed Gezhouba may get an injection of some new assets," Cao Zhu, an analyst at First Capital Securities Co., said by telephone from Shenzhen.

SAIC led gains for automakers, advancing 2.1 percent to 18.10 yuan. FAW Car Co. climbed 1.5 percent to 16 yuan.

Investors should be buying China’s auto and property stocks even as the government tightens monetary policy to tame inflation, according to Deng Xiaofeng, who manages the $1.8 billion Bosera Theme Sector Fund.

Automakers Outlook

Deng said the nation’s largest car and real-estate companies will extend rallies because of valuations and on the prospect they will weather policy tightening measures better than their smaller rivals.

SAIC, the fund’s biggest holding according to its annual report, has rallied 24 percent in Shanghai this year. It trades at 9.8 times estimated earnings, compared with the average of 19.4 times in the past five years, according to data compiled by Bloomberg. The prospect of higher interest rates as China tries to curb gains in consumer prices doesn’t change the outlook for the nation’s auto market, Deng said.

China Vanke Co., the country’s biggest developer by market value, slid 1.7 percent to 8.63 yuan. The company posted a 7 percent increase in first-quarter profit. Poly Real Estate Group Co., the second biggest, retreated 4 percent to 13.76 yuan.

Xinjiang Goldwind plunged 6.7 percent to 17.88 yuan after saying first-quarter profit dropped 17 percent.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net -0- Apr/20/ :42 GMT

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