China’s Stocks Rise to 9-Month High on Service Industries

China’s benchmark stock index rose to the highest level in nine months after growth in the nation’s service industries accelerated.

China Shenhua Energy Co. (601088) and Yanzhou Coal Mining Co. led a gauge of energy stocks to the biggest advance among industry groups in the CSI 300 (SHSZ300) Index. Sany Heavy Industry Co., the biggest Chinese machinery maker, surged 2.3 percent. ZTE Corp. (000063), the nation’s second-biggest phone-equipment maker, tumbled 8.1 percent, dragging down the Shenzhen Composite Index. China Vanke Co. and and Poly Real Estate Group Co. fell on concern rising home prices will lead to new property restrictions.

The Shanghai Composite Index (SHCOMP) rose 0.4 percent to 2,428.15 at the close, the highest since May 8, even as three stocks fell for every two that climbed. The measure advanced 5.6 percent last week, the most since October 2011, after data showed manufacturing expanded last month. A government report yesterday showed service industries grew at the fastest pace since August.

“The stock market is enjoying a valuation expansion and improving data are providing support,” said Li Jun, a strategist at Central China Securities Co. in Shanghai.

The Shanghai index has risen 24 percent from a three-year low on Dec. 3, signaling a bull market to some investors, on signs economic growth is accelerating. The gauge is valued at 13.3 times reported profit, the highest level since Sept. 2011, data compiled by Bloomberg show. That’s still lower than the measure’s seven-year average multiple of 21.4, the data show.

The CSI 300 rose 0.2 percent to 2,748.03 today, while the Shenzhen Composite slid 0.9 percent. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong gained 0.1 percent. Mainland markets will be closed all of next week for the Lunar New Year holidays.

Economic Outlook

Trading volumes in the Shanghai Composite were 31 percent higher than the 30-day average today, according to Bloomberg data. The gauge’s 100-day volatility was at 18.7, the highest level since June 2012.

A measure of energy stocks rose 2.7 percent. Shenhua, the biggest coal producer, added 1.3 percent to 24.93 yuan. China Coal Energy Co. (601898), the second largest, gained 2.7 percent to 8.0 yuan. Datong Coal Industry Co. surged by the 10 percent daily limit to 10.26 yuan.

China’s services industries rose as gains in retailing and construction aided government efforts to drive a recovery. The non-manufacturing Purchasing Managers’ Index climbed to 56.2 in January from 56.1 in December, the National Bureau of Statistics and China Federation of Logistics & Purchasing said in a statement. A reading above 50 indicates expansion.

The federation’s manufacturing PMI released Feb. 1 showed a fourth month of expansion and a separate gauge from HSBC Holdings Plc and Markit Economics rose to the highest level in two years. The statistics bureau and the customs office are due to release January data on inflation and exports on Feb. 8.

Sany, ZTE

Sany Heavy surged 2.3 percent to 12.28 yuan, the highest since Aug. 7. Construction machinery equipment sales will peak after the Chinese new year, KGI Securities wrote in a report dated Jan. 31. Excavator sales may post year-on-year growth as sector fundamentals are continuing to improve, KGI said.

ZTE tumbled 8.1 percent to 10.02 yuan, its biggest drop since Oct. 15. Mobile phones including smartphones will be investigated under a tariff act, the U.S. International Trade Commission announced on Jan. 31.

Vanke, the nation’s biggest listed property developer, lost 0.5 percent to 11.90 yuan in Shenzhen. Poly Real Estate, the second biggest, slid 1.1 percent to 13.13 yuan.

Home Prices

There is increasing likelihood that the government may introduce new measures to contain housing price inflation, Zhan Zhiwei, chief China economist at Nomura Holdings Inc., wrote in a report today.

New home prices rose 1 percent in January, the biggest gain in two years, SouFun Holdings Ltd., the country’s biggest real estate website owner, said on Feb. 1, based on its survey of 100 cities.

Chinese stocks traded in the U.S. rose on Feb. 1 after data showed the U.S. added jobs in January and manufacturing expanded. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 0.8 percent in New York. The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., advanced 0.8 percent.

--Zhang Shidong. Editors: Allen Wan, Darren Boey

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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