China’s stocks rose, driving the benchmark index to a five-week high, after Premier Wen Jiabao said the economy has started to stabilize and industrial production and retail sales data beat estimates.
SAIC Motor Corp. (600104) led industrial companies higher after factory output accelerated in September. Nine out of 10 industry groups in the CSI 300 Index rose at least 1 percent after a report showed the economy grew 7.4 percent in the third quarter, matching analyst estimates. Shanghai Hanbell Precise Machinery Co. surged by 10 percent, pacing gains for makers of equipment used in developing geothermal energy after the China Securities Journal said the government may issue industry guidelines.
The Shanghai Composite Index (SHCOMP) climbed 1.2 percent to 2,131.69 at the close, its highest level since Sept. 10. The CSI 300 (SHSZ300) rose 1.5 percent to 2,336.08, while the Hang Seng China Enterprises Index (HSCEI) gained 1.4 percent. The Bloomberg China-US 55 Index (CH55BN) added 0.4 percent in New York yesterday.
“The data shows initial signs that the economy has stabilized, which is good,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million. “It still remains to be seen if the improvement in the economy can be translated into good corporate earnings.”
The Shanghai Composite has rebounded 6.4 percent since reaching a three-year low on Sept. 26 on expectations regulators will introduce measures to stabilize the market ahead of a once- in-a-decade power transition of the Communist Party in November. The gauge is still down 3.1 percent this year and trades at 10 times estimated earnings, compared with the 17.9 average since Bloomberg began compiling the weekly data in 2006.
‘Relatively Good’ Economy
China’s economic situation is “relatively good,” Wen said yesterday, the Xinhua News Agency reported. Wen said the government is confident of achieving annual targets and the economy will continue to show “positive changes,” Xinhua reported, citing his comments in meetings he held with industry leaders, company executives and some local government officials on Oct. 12-15.
The third-quarter growth figure compares with a previously reported 7.6 percent expansion in the second quarter. Industrial production rose 9.2 percent in September, the report showed. That compared with the 9 percent median forecast of 37 analysts and an 8.9 percent gain in August. Reports also showed retail sales and fixed-asset investment exceeded forecast last month.
SAIC, China’s largest carmaker, added 3.7 percent to 13.49 yuan. Anhui Jianghuai Automobile Co., a unit of the biggest light-truck exporter, rose 2.3 percent to 5.46 yuan. Anhui Conch Cement Co. (600585), the biggest cement maker, gained 2.5 percent to 16.55 yuan.
Today’s data in China followed reports showing exports exceeded forecasts in September and money supply grew at the fastest pace in 15 months. Inflation last month was close to the slowest pace in two years and producer prices fell the most since 2009, government data showed on Oct. 15, giving authorities more room to ease policy.
China’s third-quarter GDP may be a trough though it may take another couple of quarters for growth to significantly recover, Lu Ting, China economist at Bank of America Corp., wrote in a note today. Since mid-Sept., the bank has seen increasing evidence of “green shoots” from industries including transportation, commodities, exports, property, retail and manufacturing, he wrote.
China Vanke Co., the biggest developer, rose 3.8 percent to 8.44 yuan. Poly Real Estate Group Co., the second largest, added 6.4 percent to 11.28 yuan. China Merchants Property Development Co. (000024) jumped 6.3 percent to 22.22 yuan after third-quarter profit surged 95 percent from a year earlier.
China’s September new home prices rose in fewer than half the cities monitored by the government from a month earlier, indicating property curbs are stabilizing the market.
Prices climbed in 31 cities of the 70 the government tracks from the previous month, compared with 35 cities in August, according to data released by the statistics bureau today. Prices fell in 22 cities, the data showed.
“Today’s data shows our forecast is on track,” said Zhu Haibin, China economist at JPMorgan Chase & Co. “It suggests that the housing market is bottoming out.”
Shanghai Hanbell climbed the maximum 10 percent to 15.07 yuan. Dalian Refrigeration Co. jumped 10 percent to 8.45 yuan.
China may soon announce guidelines for geothermal energy exploration and use, the China Securities Journal reported, without saying where it got the information. The government will likely take more concrete measures on geothermal energy generation and subsidies in the future, it said.
Yuan-denominated A shares are poised to close today at a discount to their underlying Hong Kong-listed stock for the first time since August last year, according to data from Hang Seng Bank Ltd.
Thirty-day volatility in the Shanghai Composite was at 19.9 today, compared with this year’s average of 17.2. About 8.7 billion shares changed hands in the gauge, 13 percent higher than the daily average in 2012. The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose 1.4 percent to a five-month high.
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