China’s Stocks Rise to Highest in Month on Stimulus Speculation

China’s stocks rose to the highest level in almost a month on speculation the government will take steps to boost economic growth after trade data missed estimates and industrial output grew at the slowest pace in three years.

Sany Heavy Industry Co. (600031) and Anhui Conch Cement Co. rallied among construction-related stocks after President Hu Jintao urged governments in Asia to speed up infrastructure development. Jiangxi Copper Co. surged to the highest level in almost two months on higher prices of the metal. China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, slid the most in a week on concern trade flows will slow.

“Data still show the economy hasn’t rebounded from the bottom,” said Wu Kan, Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Policy easing will continue but it will likely be at a moderate pace.”

The Shanghai Composite Index (SHCOMP) added 0.3 percent to 2,134.89 at the close, the highest since Aug. 14. The measure extended a 3.7 percent jump on Sept. 7 that was the biggest gain in eight months. The CSI 300 Index (SHSZ300) rose 0.4 percent to 2,326.67. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong fell 0.2 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 1.2 percent in New York on Sept. 7.

Deeper Slowdown

The Shanghai Composite advanced 3.9 percent last week, the most since October, after China’s top planning body approved investment projects targeting roads and sewage treatment. Still, the measure has dropped 2.9 percent this year on concern China’s slowdown is deepening. The index is valued at 9.8 times estimated earnings, compared with the 17.4 average since Bloomberg began compiling the weekly data in 2006.

Gauges of material and industrial stocks in the CSI 300 advanced 1.5 percent and 1 percent today respectively, the two biggest gainers among the 10 industry groups.

Jiangxi Copper, the country’s biggest producer of the metal, rose 2.6 percent to 22.36 yuan, the highest close since July 20. Tongling Nonferrous Metals Group Co. (000630), the second largest, climbed 6.2 percent to 19.10 yuan. Three-month copper added as much as 0.6 percent to $8,019 a metric ton on the London Metal Exchange, the highest price since May 14, on expectations global policy makers will move to bolster growth.

Sany Heavy, the biggest Chinese machinery maker, surged 2.9 percent to 10.22 yuan, adding to a 10 percent jump on Sept. 7 after the nation’s top planning body approved new roads, railways and urban infrastructure that Nomura Holdings Inc. estimates have a combined value of about 1 trillion yuan ($157.8 billion).

Infrastructure Investment

Anhui Conch, China’s biggest cement maker, advanced 2.6 percent to 15.46 yuan, the highest close since June 21. Gansu Qilianshan Cement Group Co. (600720) surged 10 percent to 11.62 yuan, the biggest advance since Nov. 17, 2008.

Chinese infrastructure projects will provide a “credit positive” stimulus for steelmakers, cement and construction materials companies, and railway and subway equipment makers, Moody’s Investors Service said in a report today.

President Hu said infrastructure development is key to promoting recovery and achieving sustained and stable growth amid increasing downward risks to the global economy. China’s small and medium-sized enterprises are having a “hard time” and exporters are facing more difficulties, he said to business executives at an Asia-Pacific Economic Cooperation forum in Vladivostok on Sept. 8.

August Data

Industrial production increased 8.9 percent in August from a year earlier and fixed-asset investment growth in the first eight months eased to a lower-than-estimated 20.2 percent, the National Bureau of Statistics said yesterday in Beijing.

The decline in producer prices extended into a sixth month, with a drop of 3.5 percent, according to the bureau. Inflation quickened to 2 percent in August, accelerating for the first time in five months. Retail sales rose 13.2 percent from a year earlier in August, in line with the median economist estimate.

Exports gained 2.7 percent in August from a year earlier, China’s customs administration said today in Beijing. That compares with the median forecast of 2.9 percent growth in a Bloomberg News survey of 36 economists. Imports fell 2.6 percent, compared with the survey’s prediction for an increase of 3.5 percent.

Policy Easing

China Cosco lost 1.9 percent to 4.09 yuan. China Shipping Development Co. (600026), a unit of China’s second-biggest sea-cargo group, fell 0.9 percent to 4.48 yuan. China Shipping Container Lines Co., the country’s second-largest carrier of sea-cargo boxes, lost 1.8 percent to 2.19 yuan.

China’s central bank has held off from monetary policy loosening since July 5 when it cut interest rates for the second time in less than a month. It lowered reserve requirements three times between November and May by 50 basis points each time.

The nation’s money-market rate dropped, extending a three- week slide, on speculation the central bank will make more funds available for lending. The monetary authority may announce a reserve-ratio cut this week, according to a Daiwa Capital Markets report.

Thirty-day volatility in the Shanghai Composite jumped to 16 today, compared with this year’s average of 17. About 13.9 billion shares changed hands in the gauge on Sept. 7, 78 percent higher than the daily average this year.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose 2.8 percent on Sept. 7, the biggest intraday advance since June 29, as Chinese infrastructure projects announced last week sparked speculation of further stimulus to boost growth.

Hao Hong, Bocom International Holdings Co.’s managing director for research, cited the infrastructure spending as a catalyst for Chinese equities. The government is likely to introduce more policies to bolster economic growth, Hong Kong- based Hong wrote in an e-mail on Sept. 7.

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

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

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