China’s Stocks Rise Most in Month on Economic Optimism
China’s stocks rose, driving the biggest gains for the benchmark index in a month, on economic growth optimism and as property developers rallied after China Vanke Co. (000002)’s profit beat analyst estimates.
Vanke advanced 6 percent after the biggest Chinese developer said net income climbed 30 percent last year. Sany Heavy Industry Co. (600031) and Anhui Conch Cement Co. led industrial companies to the second-biggest gain among 10 groups in the CSI 300 Index (SHSZ300), before the release of a manufacturing report tomorrow. Ping An Bank Co. jumped 9.4 percent, extending gains this week to 20 percent on the prospect of higher earnings.
“The foundation for the stocks rally, namely the economic recovery, is still there as people spend more on housing and cars to improve their lives,” said Dai Ming, a fund manager at Hengsheng Hongding Asset Management Co. in Shanghai, which manages $190 million. “We’ll have some corrections along the way given the index has had a very decent rally.”
The Shanghai Composite Index (SHCOMP) rose 2.3 percent to 2,365.59 at the close, the biggest advance since Jan. 28. It pared this month’s losses to 0.8 percent, the first monthly drop since November. The index has gained 21 percent since a bull-market rally started on Dec. 3. Thirty-day volatility was at 20.19 today, the highest in a month. The measure trades for 9.8 times projected 12-month earnings, near the lowest since Dec. 24.
The CSI 300 Index gained 3 percent to 2,673.33, while the Hang Seng China Enterprises Index (HSCEI) advanced 2.4 percent. The Bloomberg China-US 55 Index (CH55BN) added 0.8 percent in New York yesterday, as U.S. housing data sent the Dow Jones Industrial Average to the highest level in five years.
The National Bureau of Statistics and China Federation of Logistics and Purchasing are scheduled to release a manufacturing index for this month tomorrow. The Purchasing Managers’ Index may climb to 50.5 from 50.4 a month earlier, according to the median estimate of 30 economists in a Bloomberg News survey. The number of 50 divides expansion and contraction. HSBC Holdings Plc’s PMI index is also due tomorrow.
HSBC released a preliminary reading of its PMI index on Feb. 25 that trailed economists’ estimates. Bank of America Corp.’s China economist Ting Lu said the manufacturing data was “heavily distorted” by the Chinese Lunar holiday this month.
A gauge of developers surged for a second day, gaining 3.5 percent. Vanke jumped 6 percent to 12 yuan after reporting net income climbed to 12.55 billion yuan ($2 billion) last year. That compares with the 11.95 billion yuan average profit estimate of 16 analysts surveyed by Bloomberg. Biggest rival Poly Real Estate Group Co. rose 3.6 percent to 12.82 yuan.
“We’re going to see earnings grow again after 18 to 24 months of flat earnings, which helps create tailwinds for Chinese stocks,” Eric Brock, who helps manage $3.8 billion as a portfolio manager at Clough Capital Partners, said by phone yesterday from Boston.
Ping An Bank jumped 9.4 percent to 23 yuan, the highest close since April 6, 2010. It’s scheduled to release earnings on March 7, according to data compiled by Bloomberg. The lender will probably report full-year net income of 13.87 billion yuan ($2.2 billion), according to 11 analyst estimates compiled by Bloomberg. The bank reported profit of 10.28 billion yuan in 2011, when it was named Shenzhen Development Bank Co. (000001) China Minsheng Banking Corp. advanced 5.4 percent to 10.36 yuan.
China will keep property curbs for a long time, Vanke’s President Yu Liang said yesterday. Chinese stocks have fallen this month on concern the government will announce more property restrictions to curb gains in housing prices and after the central bank took steps to reduce market liquidity.
Sany Heavy, the biggest maker of construction equipment, advanced for a second day, gaining 4.5 percent to 11.79 yuan. Anhui Conch, China’s biggest cement maker, jumped 6.3 percent to 19.39 yuan.
The rally for China’s stocks since the end of last year hasn’t concluded because the economy will continue to recover and the government may introduce more projects to support growth, David Lai, portfolio manager at the Hong Kong unit of China Asset Management, said in a phone interview on Feb. 25.
China will open its annual National People’s Congress on March 5 to set this year’s growth target and discuss economic policies. The congress will also elect new government leaders.
Almost half of China’s provinces are setting their growth sights lower in the wake of the central government’s emphasis on the quality of expansion over speed, a sign of an increased focus on tackling rising debt. Fourteen provinces have set lower targets for gross domestic product expansion this year than in 2012 and the other 17 left their goals unchanged, according to Nomura Holdings Inc.
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