China’s Stocks Rise, Paring Biggest Weekly Decline in Year

China’s stocks rose, paring the benchmark index’s steepest five-day drop in almost a year, on speculation this week’s losses were excessive.

Jiangxi Copper Co. and Yanzhou Coal Mining Co. led a rebound for materials and energy producers. China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, jumped the most in two weeks as container shipping rates rose. Industrial & Commercial Bank of China (601398) Ltd., the nation’s biggest lender, fell 0.5 percent after the China Securities Journal said the government may cut the dividend payout ratio of listed banks.

“There could be a short rebound after reaching lows but it’s not sustainable,” said Wu Kan, Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “We need to see better economic numbers and more policy loosening.”

The Shanghai Composite Index (SHCOMP) rose 0.1 percent to 2,026.69 at the close. The gauge slid 4.6 percent this week, the most since the week ended Oct. 21, 2011, after a report on manufacturing signaled a contraction and escalating tensions with Japan threatened trade.

The CSI 300 Index added 0.1 percent to 2,199.06 today while the Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong rose 0.8 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, dropped 1.6 percent in New York.

The Shanghai Composite had fallen 7.9 percent this year amid speculation concern the government isn’t introducing stimulus policies fast enough to counter the slowdown in the economy. The gauge is valued at 9.3 times estimated earnings, compared with the average of 17.5 since Bloomberg began compiling the weekly data in 2006.

Commodity Producers

The measure’s relative strength index is at 36.6. The RSI measures how rapidly prices have advanced or declined during the specified time period. Some analysts see a reading of less than 30 as a signal to buy.

Gauges of material and energy stocks were among the three biggest gainers on the CSI 300 index, adding 1.2 percent and 0.9 percent respectively. Jiangxi Copper, the biggest producer of the metal, gained 0.6 percent to 22.02 yuan, paring a loss to 4.8 percent for this week. Yanzhou Coal Mining Co. advanced 0.7 percent to 17.58 yuan, trimming a five-day drop to 6.8 percent.

Guangzhou Automobile Group Co., which has joint ventures with Toyota Motor Corp. and Honda Motor Co., gained 1.1 percent to 5.34 yuan, paring a weekly loss to 9.3 percent.

Japan Dispute

Honda President Takanobu Ito said today the automaker was able to reopen its factories in China, though it hasn’t fully recovered due to parts procurement and safety concerns.

Japan’s purchase last week of the islands triggered protests and attacks on Japanese businesses in China, straining ties between Asia’s two biggest economies. U.S. Assistant Secretary of State Kurt Campbell said yesterday islands at the heart of a dispute between Japan and China fall under an American defense pact with Japan, while urging the sides to resolve the standoff via diplomacy.

China Cosco surged 6 percent to 4.07 yuan, the most in two weeks. The Baltic Dry Index, a measure of commodity shipping costs, rose 4.6 percent to 755 yesterday. China Cosco was upgraded to neutral from sell amid monetary easing in U.S. and Japan, as well as a likely improvement in the operating environment in the first quarter, Bank of Communications Co. said in a report yesterday.

Policy Outlook

A Chinese manufacturing survey released yesterday pointed to an 11th month of contraction, supporting the case for increased stimulus. The preliminary reading was 47.8 for a China purchasing managers’ index by HSBC Holdings Plc and Markit Economics, compared with a final level of 47.6 last month.

The Chinese central bank has left benchmark interest rates unchanged since July on concern that inflation is accelerating even as economic growth drops to a three-year low. Policy makers have also kept bank reserve requirements at 20 percent since May, and have allowed money-market rates to surge before the week-long National Day holiday starting Oct. 1.

China’s slowdown may last longer than during the global financial crisis because of worsening external demand and limited lending to smaller companies, a state researcher said.

Growth may slow for a ninth straight period to below 7 percent in the first quarter, Yuan Gangming, an economist with the Chinese Academy of Social Sciences, said in an interview Sept. 19 in Beijing.

Suning Appliance Co., which sells household appliances, fell 6.2 percent to 6.05 yuan after Shenyin & Wanguo Securities said air-conditioner output and sales fell in August. Gree Electric Appliances Inc. (000651) slid 0.5 percent to 20.39 yuan.

China may lower the dividend payout ratio of listed banks to help them retain more profits for use as capital, the China Securities Journal reported, citing unidentified people.

ICBC lost 0.5 percent to 3.66 yuan. China Construction Bank Corp., the second-biggest lender, declined 0.3 percent to 3.87 yuan.

To contact Bloomberg News staff for this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

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

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