China’s Stocks Rise to Six-Week High

China’s stocks rose, sending the benchmark index to a six-week high, on speculation the government will introduce measures to boost equities before a leadership transition next month.

GF Securities Co. (000776) climbed 2.6 percent, leading gains among brokerages, after the regulator scrapped administrative reviews on securities firms’ asset management businesses. Henan Shuanghui Investment & Development Co., the listed unit of China’s biggest hog processor, added 1.8 percent after third- quarter profit more than doubled. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. (600111), China’s biggest producer of rare earth, declined the most in a month after earnings slumped.

“Investors anticipate the market will be stable before November’s Party Congress as the government will usually try to create a good environment for important events,” said Wu Kan, a fund manager at Dazhong Insurance Co. in Shanghai, which oversees $285 million.

The Shanghai Composite Index (SHCOMP) gained 0.2 percent to 2,132.76 at the close, the highest level since Sept. 10. The CSI 300 Index (SHSZ300) added 0.4 percent to 2,341.59. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong rose 0.3 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, fell 0.7 percent in New York on Oct. 19.

The Shanghai Composite rose 1.1 percent last week, a fourth week of gains and the longest winning stretch since April, after Premier Wen Jiabao said the economy has started to stabilize as data including industrial production and retail sales beat forecasts.

Party Congress

The Shanghai index 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 the 18th Communist Party Congress slated for Nov. 8. The gauge is still down 3 percent this year and trades at 10 times estimated earnings for this year, compared with the 17.9 average since Bloomberg began compiling the weekly data in 2006.

Vice President Xi Jinping is forecast to replace President Hu Jintao as party chief in the congress, which may run for at least a week.

The government is likely to intensify market stabilization efforts before the meeting, Hao Hong, managing director of research at Bank of Communications Co., said in an Oct. 19 report. This year, the China Securities Regulatory Commission has expedited approvals of foreign investors, cut stock-trading fees by 25 percent and allowed individual investors to advise on pricing IPO shares as part of efforts to boost the market.

Margin Cap

The securities regulator will ease limits and cancel administrative review on brokerages’ asset management businesses, the China Securities Regulatory Commission said in a statement on Oct. 19 after the market closed.

GF Securities, the third-biggest listed brokerage by market value, gained 2.6 percent to 14.09 yuan. Industrial Securities Co. (601377) added 2.2 percent to 11.05 yuan. Huatai Securities Co. advanced 2 percent to 9.99 yuan.

Henan Shuanghui climbed 1.8 percent to 59.90 yuan after the pork processor said third-quarter profit jumped 111 percent from a year earlier.

China’s stocks fell earlier fter the China Securities Journal reported Shaanxi province will prevent property companies from reaping profit margins of more than 10 percent.

Shaanxi issued a cap on profit margins from property sales for cities in the northwest province, the China Securities Journal reported, citing a document issued by the province’s housing and pricing authorities. Property projects with margins of more than 10 percent won’t be given sales licenses, it said.

Shaanxi Construction Machinery Co. plunged 4.9 percent to 6.98 yuan.

Earnings Drop

Baotou Rate-Earth slid 3 percent to 32.46 yuan, its biggest decline since Sept. 20. Third-quarter net income fell 90 percent from a year earlier, according to an exchange statement.

The MSCI Asia Pacific Index (MXAP) fell 0.3 percent today after earnings at U.S. bellwether General Electric Co. missed estimates and Japan’s exports dropped more than forecasts.

The U.S. is China’s second-largest export market, making up about 17 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.

Thirty-day volatility in the Shanghai Composite was at 19.7 today, compared with this year’s average of 17.2. About 6 billion shares changed hands in the gauge, 22 percent lower than the daily average in 2012.

Investors should maintain their current holdings of China’s stocks as there’s lack of convincing evidence of fundamental improvement, Ling Peng, a strategist at Shenyin & Wanguo Securities Co., wrote in a report dated Oct. 19. Shenyin was ranked No. 1 for equity strategy research by New Fortune magazine in 2010.

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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