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Growth Outlook Drives Advance as Suntech Surges: China Overnight

Chinese stocks in New York jumped, pushing the benchmark index to its longest rally in 15 months, on prospects government data today will signal the slowdown in the world’s second-largest economy has reached a bottom.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. climbed 0.4 percent to 95.76, rising for a sixth day. Suntech Power Holdings Co. (STP), the world’s largest solar-panel maker, and software developer AsiaInfo- Linkage Inc. (ASIA) led gains, surging the most since August. China Life Insurance Co. traded at the biggest discount to its Hong Kong shares since March after saying net income in the first nine months probably fell 55 percent from a year earlier.

The economic situation in China, which posted the slowest growth since 2009 in the second quarter, is “relatively good” and expansion has started to stabilize, Premier Wen Jiabao said yesterday, according to the official Xinhua News Agency. The gross domestic product report, which economists predict will show growth slowed to 7.4 percent in the three months to Sept. 30, follows data this week showing bigger-than expected September export gains and growth in money supply.

“It certainly looks like Chinese stocks have stabilized, which is heartening,” Timothy Ghriskey, chief investment officer at New York-based Solaris Group LLC, which manages about $2 billion in assets, said by phone yesterday. “China’s growth rate is still well above the rest of the world, and it remains a great opportunity.”

Five-Month High

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose for a seventh day, adding 1.4 percent to a five-month high of $37.35. The Standard & Poor’s 500 Index (SPX) climbed 0.4 percent to 1,460.91 as a Commerce Department report showed new-house construction in the U.S. rose by the most since July 2008, exceeding all forecasts in a Bloomberg survey of economists.

The Shanghai Composite Index (SHCOMP) gained 0.3 percent yesterday to 2105.62. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong surged 1.2 percent to 10,491.46, the highest level since May 8.

Suntech, based in Wuxi, China climbed 13 percent to 87 U.S. cents, rising for the first time in eight days. Trading volumes were 73 percent of the three-month daily average, data compiled by Bloomberg showed. The shares have tumbled 79 percent since February.

Suntech probably gained because of the magnitude of the recent declines, Aaron Chew, an analyst at Maxim Group LLC in New York, said by phone yesterday.

Worst is Over

The company is in talks with Wuxi Guolian Development (Group) Co. and Wuxi Industry Development Group Co. over possible cooperation, China Business News reported on Oct. 16, citing people it didn’t identify. Zhang Jianmin, Suntech’s media relations manager, didn’t answer calls on Oct. 16 and Walter Scott, the company’s communications manager in San Francisco declined to comment when contacted by e-mail yesterday.

The worst of the slowdown in China is probably over, Credit Suisse AG analysts wrote in a note yesterday. The nation’s economy bottomed in the third quarter and fourth-quarter growth will be better both from a year ago and compared with the previous three months, China Securities Journal reported yesterday, citing Chen Daofu, a researcher at the State Council’s Development Research Center.

AsiaInfo, which sells software to China’s biggest telecommunications operators, jumped 6 percent to a two-week high of $10.86 in New York trading, extending its two-day rally to 9.5 percent. The shares declined over the previous four weeks, falling 8.3 percent last week.

Buyout Offers

The Beijing-based company said it plans to report third- quarter earnings on Oct. 31.

AsiaInfo received a buyout offer in January from a subsidiary of Citic Capital China Partners II, a private-equity fund owned by China Citic Bank Corp., and said in a July 31 statement that the company continued to consider privatization proposals, while “there can be no assurance that any definitive offer will ultimately be made.”

“We expect the company to give an update on the buyout deal in its third-quarter results, and we expect the deal to be completed before the year-end,” said Joey Yang, a New York- based analyst at Susquehanna International Group LLP. “The losses in previous weeks were overdone, and nothing has changed in the company’s fundamentals.”

Beijing-based China Life, China’s biggest insurer, lost 5.7 percent to $43.01 in New York yesterday, the biggest tumble in seven months. The company’s American depositary receipts, each representing 15 underlying shares, traded 3.4 percent below its Hong Kong stock, the biggest discount since March 6.

26% Profit Drop

China Life said profit for the first nine months of this year may fall about 55 percent because of lower investment yields and bigger impairment losses, according to a statement to the Hong Kong Stock Exchange yesterday. The insurer reported a 26 percent profit decline for the first half after an almost 20 percent slump in the Shanghai benchmark stock measure.

China Life is scheduled to report nine-month results on Oct. 26.

Guangshen Railway Co., which operates trains in China’s Guangdong province, advanced for a third day, climbing 2.2 percent to $18.20, the highest level in five months.

China plans to ramp up work on public transport infrastructure and will offer subsidies and preferential tax treatment to companies in the industry, the government said Oct. 10 on its website. The Railways Ministry will increase spending on railroad construction to 516 billion yuan ($82 billion) this year, from 496 billion yuan reported a month ago, according to a bond prospectus released on Oct. 10.

China’s Communist Party will nominate new leaders at a congress starting Nov. 8, a once-in-a-decade power transition.

“With the political changeover, it’s easier to them kick up infrastructure spending,” Arjun Jayaraman, who helps manage emerging-market equities at Causeway Capital Management LLC, which has $15 billion under management, said by phone yesterday from Los Angeles. Rail and infrastructure sectors will benefit, he said. “Guangshen should be a good player.”

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net

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