China Consumer Staples Lead Gains for CSI 300; Gold Drops

Chinese consumer-staples producers and energy companies led gains in the CSI 300 Index (SHSZ300), while gold producers sent a gauge of material stocks to its first decline in four days.

Kweichow Moutai Co. rose 2.3 percent, pacing an advance for liquor makers. China Shenhua Energy Co. climbed to the highest in six months after BOCOM International upgraded the Hong Kong- traded shares. Shandong Gold Mining Co. declined 2.3 percent after bullion prices dropped in New York yesterday.

The Shanghai Composite Index (SHCOMP) slipped less than 0.1 percent to 2,162.24 at the close, with gainers and decliners almost equal. The CSI 300 rose 0.1 percent to 2,371.11. Shanghai trading volumes were up 30 percent from the 30-day average. The measure has rebounded 10 percent from an almost four-year low on Dec. 3. China will promote economic reforms through measures such as tax cuts, the Xinhua News Agency reported Dec. 16.

“There will be a lot of fluctuations in the short-term,” Deng Wenyuan, an analyst at Soochow Securities Co., said by phone today from Suzhou. “However, the uptrend will remain. The Shanghai Composite has fallen too much and for too long this year. There are expectations of economic reforms and valuations are cheap.”

The Shanghai Composite has dropped 1.7 percent this year, heading for a third straight annual loss. The measure trades at 12 times reported earnings, the highest since July, after valuations fell to 10.8 this month, the lowest level since at least 1997, data compiled by Bloomberg show. The Hang Seng China Enterprises Index advanced 0.8 percent today. The Bloomberg China-US Equity Index gained 1 percent in New York yesterday.

Economic Outlook

China’s economy may grow faster next year, the World Bank said in a report today. More investors than ever say they are bullish about the growth outlook, a Bank of America Corp. monthly survey showed. Corporate earnings are set to climb as much as 10 percent next year, Russell Investments said.

“There’s more acknowledgement that the economy is recovering and investors think company earnings may rise,” Shi Wei, a fund manager at Bank of Communication Schroder Fun Management Co., said in a phone interview today from Shanghai.

Moutai, the biggest maker of baijiu liquor, rose 2 percent to 218.86 yuan, extending gains for a fourth day. Moutai’s parent may steadily raise its stake in the company, the Shanghai Securities News reported Dec. 13, citing Chairman Yuan Renguo. The stock dropped 13 percent last month after some products made by liquor maker JiuGuiJiu Co. were reported to have contained excessive levels of plasticizer. Rival Wuliangye Yibin Co. added 2.1 percent to 27.77 yuan today.

Shenhua, Shandong

China Shenhua, the nation’s biggest coal producer, gained 0.8 percent to 23.59 yuan. The Hong Kong shares jumped 2.9 percent in Hong Kong today after they were raised to Long-term Buy from Neutral at BOCOM. Global coal demand will rise 2.6 percent annually in the next six years and challenge oil as the top energy source, according to the International Energy Agency.

A gauge of material producers in the CSI 300 dropped 0.6 percent, the most among 10 industry groups. Shandong Gold, the second-largest Chinese producer, declined 2.3 percent to 36.53 yuan. Zijin Mining Group Co., the largest, fell 1 percent to 3.74 yuan.

The gold price fell to $1,661.10 yesterday, the lowest since Aug. 31, as optimism that a U.S. budget deal may be reached boosted equities and pared demand for the metal as an alternative asset.

The Shanghai index’s 14-day relative strength index is at 68.6 after reaching 70 yesterday, which some traders use as a signal to sell.

Bottoming Growth

China’s economy may grow 7.9 percent in 2012, compared with 9.3 percent in 2011, the World Bank said. Asia’s largest economy may expand 8.4 percent next year, and the country’s slowdown “appears to now have bottomed out,” it said.

More investors than ever say they are bullish about China’s growth outlook, a Bank of America Corp. monthly survey showed. A net 67 percent of money managers, who together oversee $503 billion, predicted that the economy will grow at a faster rate next year, the Bank of America monthly survey showed. This is the highest reading since the survey data started in 2003.

Corporate earnings are set to climb as the economy emerges from its slowdown and more people move to cities, Russell Investments said. Chinese companies that can benefit from an increase in domestic consumption may post even greater growth, Gustavo Galindo, who helps manage $8 billion of emerging-market equities for Russell in New York, said in a phone interview yesterday.

The China Securities Regulatory Commission has suspended initial public offerings since late October as investors’ appetite for new stocks waned amid falling share prices.

IPO Selling

China’s IPOs have rewarded corporate insiders for selling shares on the first trading day while penalizing longer-term holders, a trend that’s pressuring regulators to curb insider advantages.

Mainland investors had an average gain of 23 percent if they sold IPO shares after one day of trading, while losing an average 42 percent if they held for a year, according to data compiled by Credit Suisse Group AG. Hong Kong IPO holders had a 6 percent gain if they sold on the first day and a 15 percent loss after a year, the data show.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., added 0.5 percent to a nine- month high of $39.54, as U.S. President Barack Obama came closer to closing a deal on the federal budget with Republican House Speaker John Boehner.

-- Editors: Allen Wan, Richard Frost

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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