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China’s Stocks Jump to Five-Month High, Erasing Losses This Year

China’s benchmark index rallied to the highest level in five months, erasing this year’s losses on speculation an improving economic outlook will boost earnings.

The Shanghai Composite Index (SHCOMP) rose 2.5 percent to 2,213.61 at the close, and is up 0.6 percent in 2012. China Vanke Co. (000002) and China Minsheng Banking Corp. (600016) surged more than 4 percent, leading gains for property developers and banks. The Shanghai measure has risen 13 percent since this year’s closing low of 1,959.77 on Dec. 3 as the nation’s new leaders said they would promote urban development as part of economic reforms.

“There are growing expectations that new leaders will take measures to reform the economy,” said Wang Zheng, Shanghai- based chief investment officer at Jingxi Investment Management Co., which manages $120 million. “That’s why you see all these big-caps rallying today. The ongoing economic recovery is spurring the rebound as well.”

Vanke and Poly Real Estate Group Co., the biggest Chinese developers, extended a rally after the government said it would support demand from residents seeking bigger homes. Minsheng Banking jumped to a four-year high as Shenyin & Wanguo Securities Co. said China’s economy will continue to shows signs of recovery this month. Liquor maker Wuliangye Yibin Co. (000858) added 1.3 percent after the 21st Century Business Herald reported that it may raise product prices.

The CSI 300 Index (SHSZ300) jumped 2.8 percent to 2,448.40 today, with the 10 industry groups gaining at least 1.4 percent. Hong Kong’s market is shut today and tomorrow for holidays. Trading volumes in the Shanghai Composite today were 86 percent higher than the 30-day average. The index, which climbed above its 200- day moving average, trades at 10.8 times estimated earnings, compared with 12 times for the MSCI Emerging Markets Index, according to weekly data compiled by Bloomberg.

Monthly Jump

The Shanghai index is headed for its biggest monthly advance since October 2010 on signs economic growth is stabilizing and the government will boost urban investment. 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.

The statistics bureau is scheduled to release industrial companies’ November profit on Dec. 27. Net income surged 20.5 percent from a year earlier in October, according to the bureau.

Industrial production growth may accelerate to 10.2 percent this month from 10.1 percent in November and producer prices may decline at a slower pace, Li Huiyong and Meng Xiangjuan, analysts at Shenyin & Wanguo Securities Co., wrote in a report today. The Shanghai-based brokerage was ranked No. 1 for both macro-economy and equity strategy research by New Fortune magazine this year.

Financial Stocks

A measure of 52 financial stocks in the CSI 300 surged 3.6 percent today, the biggest gain among the 10 industry groups. Vanke, China’s biggest listed property developer, climbed 6 percent to 10.12 yuan. Poly Real Estate, the second largest, advanced 4.7 percent to 12.84 yuan. China Merchants Property Development Co. (000024) added 3.7 percent to 27.77 yuan.

The Ministry of Housing and Urban-Rural Development said today it will support “home improvement demand” next year, while keeping in place home-purchase limits to restrict speculation, the official Xinhua News Agency reported. The comments eased concerns that authorities may ramp up efforts to control the property market as home prices and sales rebound, according to CEBM Group.

“People are now thinking that the policy risk may not be as big as they worried it might be,” Luo Yu, CEBM’s Shanghai- based analyst, said by phone. “Should housing policy remain neutral, home sales would continue to rise.”

Adequate Liquidity

Minsheng Banking, the nation’s first privately owned bank, surged 4.7 percent to 7.75 yuan, the highest close since March 2008. Industrial & Commercial Bank of China Ltd., the biggest listed lender, added 3 percent to 4.14 yuan. China Construction Bank Corp., the second largest, rose 3.6 percent to 4.58 yuan.

China’s money-market rate dropped the most in two weeks today on speculation the supply of cash will improve as the central bank adds more funds to the financial system.

The 14-day repurchase rate, which measures interbank funding availability, tumbled 24 basis points to 4.38 percent as of 3:30 p.m. in Shanghai, the biggest drop since Dec. 7, according to a weighted average rate compiled by the National Interbank Funding Center.

Wuliangye, China’s second-biggest maker of white liquor by market value, added 1.3 percent to 2728 yuan. The company will raise the price of “Wuliangye 1618” to 900 yuan ($144.4) a bottle, from 689 yuan, starting January, the 21st Century Business Herald reported, citing unidentified people.

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 yesterday. Internet stocks dropped on concern the government will take stricter measures to control the nation’s online access.

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Allen Wan at awan3@bloomberg.net

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