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China’s Stocks Rise, Narrowing Quarterly Decline; BYD Jumps

China’s stocks rose, paring the benchmark index’s first quarterly loss in a year, after Greece passed austerity measures and BYD Co., the automaker part-owned by Warren Buffett’s Berkshire Hathaway Inc., jumped.

PetroChina Co. and China Shenhua Energy Co., the nation’s largest producers of oil and coal, led gains for commodity producers on higher raw-material prices. BYD surged as much as 46 percent on the first day of trading in Shenzhen after raising 1.35 billion yuan ($208 million) from a share sale. Citic Securities Co., China’s biggest listed brokerage, gained 1.6 percent on expectations a market rally will boost revenue.

“Investors are gaining confidence as measures passed by Greece have reduced the odds that an upheaval will take place in global financial markets,” said Dai Ming, fund manager at Shanghai Kingsun Investment Management & Consulting Co. “On the domestic front, the market expectation is that inflation will be peaking soon.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, rose 33.59 points, or 1.2 percent, to 2,762.08 at the 3 p.m. close, the highest close since May 24. It fell 1.1 percent yesterday, the most since June 16. The CSI 300 Index (SHSZ300) added 1.5 percent to 3,044.09. Hong Kong’s stock market will be closed tomorrow for a holiday.

The Shanghai gauge slumped 5.7 percent this quarter, the first drop since the three months ended June last year, on concern that government measures to cool inflation will slow the economy. The central bank has raised reserve requirements 12 times and rates four times since the start of last year. The index is valued at 12.8 times estimated earnings, compared with the average of 18.9 times over the past five years, according to data compiled by Bloomberg.

Austerity Plan

Global shares rose for a third day yesterday, the longest advance in a month, as Greek Prime Minister George Papandreou clinched enough votes to pass the first part of an austerity plan aimed at meeting European Union aid requirements and staving off default for the debt-laden nation. Papandreou is now on track to secure a bill setting out the strategy for a 78 billion-euro ($112 billion) package of budget cuts and asset sales that is the condition for further rescue funds.

A measure of 23 energy stocks advanced 1.9 percent, the most among the CSI 300’s industry groups. PetroChina gained 1 percent to 10.89 yuan and Shenhua climbed 2.7 percent to 30.14 yuan. Yanzhou Coal Mining Co., China’s fourth-biggest coal miner, advanced 3.1 percent to 35.30 yuan.

Crude oil for August delivery gained for a third day, extending a 4.6 percent advance the previous two days and rising as much as 0.7 percent to $95.44 a barrel in New York today after the U.S. government said inventories fell almost four times as much as projected by analysts.

Banks Rebound

Banks rebounded after Caijing Magazine cited Shanghai government spokesman Chen Qiwei as saying a Hong Kong Economic Journal article claiming a financing vehicle of the Shanghai government may not be able to repay loans was “seriously untrue.”

China Merchants Bank Co. added 0.8 percent to 13.02 yuan after falling 1.8 percent yesterday. Huaxia Bank Co., partly owned by Deutsche Bank AG, rose 1 percent to 10.87 yuan.

The Shanghai Composite has risen seven out of the last eight trading days, bolstering the earnings outlook for brokerages. Citic Securities gained 1.6 percent to 13.08 yuan. Haitong Securities Co. added 2.5 percent to 9.02 yuan. China Merchants Securities Co. rose 2.1 percent to 18.38 yuan.

The Shanghai index may rebound to as high as 3,500 in the second half, bolstered by debt issues from local governments to fund affordable housing and water conservancy projects, according to Citic Securities.

Profits for Chinese listed companies may rise 18.6 percent this year, equivalent to a price-to-earnings ratio of 14 times, analysts led by Xi Feng wrote in a report today.

BYD Gains

BYD surged 41 percent to 25.45 yuan on its debut. Net income slumped 84 percent from a year earlier to 266.7 million yuan in the first three months because of declining sales and higher expenses, BYD said. Its Hong Kong-traded stock rebounded 4.6 percent to HK$24.90 after sliding 5 percent yesterday.

China’s inflation may accelerate to 6.5 percent this month as pork prices climb, according to Shenyin & Wanguo Securities Co. The central bank may raise interest rates around the time economic data for June is released, Li Huiyong and Meng Xiangjuan, analysts at the brokerage, wrote in a report today. The figures are scheduled to be released on July 15. The inflation rate was 5.5 percent last month, the highest since 2008 and exceeding the government’s annual target of 4 percent.

Economic Data

A gauge of consumer staples stocks advanced 2.8 percent this quarter, the best performer among the CSI 300’s 10 industry groups, as investors sought havens amid concerns that the economy will slow. A measure of industrial stocks slumped 7.8 percent in the period.

China is scheduled to release its June Purchasing Managers’ Index at 9 a.m. tomorrow. Manufacturing expansion may slow to 51.5 from 52 a month earlier, according to a Bloomberg survey.

Shanghai Chlor-Alkali Chemical Co., China’s biggest maker of caustic soda and polyvinyl-chloride, jumped 85 percent in the second quarter, the biggest gainer on the Shanghai Composite. Huafang Textile Co., a manufacturer of textile products, slumped 38 percent, the biggest decliner.

--Zhang Shidong. Editor: Allen Wan

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-3040 or szhang5@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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