China’s Stock Index Rises, Led by Banks, Consumer Staples Shares

China’s benchmark stock index rose for the third time in four days as gains for banks and consumer staples producers overshadowed losses for metal companies.

China Merchants Bank Co. advanced for a seventh day amid speculation financial shares were undervalued relative to earnings prospects. Kweichow Moutai (600519) Co. climbed the most in three months after the company said its controlling shareholder boosted its stake. Xinjiang Urban Construction Co. led a rally for Xinjiang-related companies on expectations they will benefit from urbanization in western China. Jiangxi Copper Co. slid the most in three weeks after metal prices fell yesterday.

The Shanghai Composite Index (SHCOMP) added 0.4 percent to 2,082.73 at the close, even as five stocks dropped for every four that gained. The Shanghai Composite has risen 6.3 percent from this year’s low on Dec. 3 after factory output and retail sales beat estimates. The CSI 300 Index (SHSZ300) climbed 0.4 percent to 2,267.77. The Hang Seng China Enterprises Index (HSCEI) advanced 1.3 percent.

“This is the start of a potential rebound for the stock market after China’s shares slumped so much this year,” said Zhang Gang, a strategist at Central China Securities Holdings Co. in Shanghai. “The economy has shown signs of recovery and there are expectations of policy reforms. If policies do materialize, we will see a second wave of gains.”

The Shanghai Composite lost 5.3 percent this year through yesterday, the most among benchmark indexes in Asia’s largest stock markets. The measure trades at 11.5 times reported earnings after falling to 10.8 on Dec. 3, the lowest since at least 1997, data compiled by Bloomberg show.

Shanghai Composite trading volumes were about 21 percent higher than the 30-day daily average for this time of day. Thirty-day volatility on the gauge was at 16, compared with this year’s average of 16.9, data compiled by Bloomberg show.

Stock Interest

A rally of 4.1 percent last week by the benchmark index failed to stop stock investors from emptying trading accounts.

Accounts containing funds dropped by about 49,000 in the week to Dec. 7 to 55.55 million, the lowest level since the week to Nov. 26, 2010, according to regulatory data compiled by Bloomberg today. Investors emptied 205,000 accounts the previous week, the fastest pace in 16 months.

The number of stock-trading accounts that made transactions in yuan-denominated A shares last week increased to 7.3 million from 6.1 million the week before, the data show.

Kweichow Moutai advanced 4.7 percent to 211.86 yuan, its biggest advance since Sept. 4. Parent China Kweichow Moutai Distillery Co. bought 452,506 shares from the secondary market, according to a statement posted to the Shanghai Stock Exchange.

Plasticizer Concern

The unit has slumped 19 percent from its high on July 13 after Xinhua News Agency reported on Nov. 21 that some of peer JiuGuiJiu Co.’s products were found to have excessive amounts of dibutyl phthalate, a plasticizer used to flavor drinks and make plastic containers. Moutai said on Dec. 10 samples met government safety levels for three chemicals, including dibutyl phthalate.

Merchants Bank advanced 0.6 percent to 11.05 yuan, extending a six-day, 11 percent rally. China Citic Bank Corp. increased 0.5 percent to 3.86 yuan. The financial gauge trades at 7.8 times reported earnings, compared to the CSI 300’s 11.4.

’’As the economy reaches a bottom, investors start looking at blue chips such as financial shares which are cheap in valuation,’’ Rainy Yuan, an analyst at Masterlink Securities Corp., said by phone in Shanghai. “Moreover, bank earnings may improve next year.

Money Supply

China’s November M2 money supply rose 13.9 percent from a year earlier, the People’s Bank of China said on its website. This compared to a 14.1 percent increase in October.

Xinjiang Urban Construction rallied 10 percent to 6.24 yuant, the biggest one-day gain since April 16. Xinjiang aims to have 58 percent of residents living in urban areas by 2020, compared with 41.3 percent in 2010, the Shanghai Securities News reported today, citing an urbanization draft plan.

China will actively promote urbanization as it expands domestic demand, strengthen real-estate controls and support small business, the Communist Party’s Politburo said on Dec. 4 in its first assessment of the economy under new leader Xi Jinping.

Jiangxi Copper, the biggest Chinese producer of the metal, fell 0.7 percent to 21.40 yuan. Copper dropped 0.4 percent in London yesterday. Alumnium Corp. of China Ltd. slid 0.4 percent to 4.82 yuan.

The Bloomberg China-US 55 Index (CH55BN), the measure of the most- traded U.S.-listed Chinese companies, added 0.5 percent in New York yesterday. The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose for a sixth day, gaining 0.1 percent to $38.80.

To contact the reporter on 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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