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China’s Stocks Rise to Three-Week High as Automakers Advance

China’s stocks rose to the highest level in three weeks amid speculation the government will offer subsidies to boost consumer spending as economic growth slows. Financial companies declined.

Anhui Jianghuai Automobile Co. (600418) jumped to a three-month high after the China Securities Journal said the government may expand rural vehicle subsidies. Agricultural Bank (601288) of China Ltd. dropped 0.4 percent, pacing losses by banks, on concern lenders’ bad debts will rise. China’s money-market rate dropped for a second day on speculation cash supply will increase as the central bank adds funds to the financial system.

“We see more liquidity and there’s more good news such as increasing subsidies for farmers,” said Wei Wei, an analyst at West China Securities Co. in Shanghai.

The Shanghai Composite Index (SHCOMP) added 0.2 percent to 2,119.94 at the close. The gauge has fallen 3.6 percent this year on concern the government is struggling to reverse the slowdown in the economy. The CSI 300 Index advanced 0.2 percent to 2,324.12.

The Shanghai Composite trades at 11.6 times the earnings of China’s biggest companies, after valuations fell to a record low of 11.3 last month. This week, the International Monetary Fund cut its 2012 growth estimate for China’s economy to 7.8 percent, while Alcoa Inc. (AA) cut its forecast for global aluminum demand, pointing to a slowdown in China.

Anhui Jianghuai, a unit of the biggest light-truck exporter, gained 0.9 percent to 5.35 yuan, the highest close since June 29.

The government may expand a subsidy for farmers to buy low emission vehicles and heavy-duty trucks, the China Securities Journal reported, citing unidentified people. Four calls to the media office of the National Development and Reform Commission, the industry planner, weren’t answered.

Appliance Sales

The Ministry of Commerce is considering extending rural subsidy for appliances, the China Securities Journal reported, citing an unidentified person close to the ministry.

Suning Appliance Co. (002024), the country’s largest electronic retailer by market value, gained 2 percent to 7.15 yuan, the highest close since July 19. Sichuan Changhong Electric Co. (600839), the second-biggest television maker, gained 1.5 percent to 2.03 yuan.

The seven-day repurchase rate, which measures interbank funding availability, dropped 60 basis points to 3.16 percent, according to a weighted average rate compiled by the National Interbank Funding Center. The monetary authority injected a total of 265 billion yuan ($42 billion) via reverse repos yesterday, the second-biggest amount for a single day since Bloomberg started compiling the data in 2004.

Banks Decline

Agricultural Bank slid 0.4 percent to 2.48 yuan. China Merchants Bank Co. lost 0.8 percent to 10.21 yuan, the most since Sept. 26. Bank of China Ltd. retreated 0.4 percent to 2.73 yuan. Investors are concerned about the risks of non-performing loans, Yayun Tang, an analyst at Northeast Securities Co., said by phone from Shanghai.

Chinese stocks in New York fell for a second day yesterday, led by Internet companies. Baidu Inc., owner of China’s most- popular search engine, sank to a three-month low after Credit Suisse Group AG became the third bank to cut its rating this month.

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

To contact the editor responsible for this story: Allen Wan at awan3@bloomberg.net

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