China’s Stocks Advance Most in Two Weeks on Earnings Speculation

China’s stocks rose the most in almost two weeks, led by property developers and power producers, on optimism over corporate earnings and as foreign direct investment gained for the first time in nine months.

Huaneng Power International Inc. (600011) and Huadian Power International Corp. (600027) climbed more than 2 percent as UOB-Kay Hian Ltd. said power suppliers may join China Resources Power Holdings Co. in reporting higher annual profit. China Merchants Property Development Co. jumped 5.3 percent, leading a rally for developers, after earnings climbed.

The Shanghai Composite Index (SHCOMP) added 0.8 percent to 2,257.43 at the close, the biggest gain since March 6. The measure dropped 1.7 percent yesterday after Guo Shuqing was replaced as head of the securities regulator and a levy on bank deposits in Cyprus threatened to plunge Europe back into crisis. The index has slid 7.3 percent from this year’s peak on Feb. 6 amid concern an economic recovery will falter as officials take steps to cool the property market and restrain inflation.

“It’s a fact that developers’ earnings will be good this year,” said Tang Yonggang, analyst at Hongyuan Securities Co. in Beijing. “Stocks fell yesterday out of fear. Investors were concerned about monetary tightening, more property measures and the new regulator is seen as a negative. It’s unlikely there’s going to be monetary tightening soon.”

The CSI 300 Index gained 0.9 percent to 2,525.10 today, while the Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong retreated less than 0.1 percent. 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.

Economic Reports

Inbound investment gained 6.3 percent from a year earlier to $8.21 billion in February, the Ministry of Commerce said in a statement today in Beijing. That compared with the median estimate of a 4.8 percent decline in a Bloomberg survey and a 7.3 percent decline the previous month.

“China’s attractiveness remain for foreign investors, from its relatively-developed infrastructure to stable macroeconomic growth,” said Sun Junwei, a Beijing-based economist with HSBC Holdings Plc. “As the global economy recovers, China may continue to see a steady inflow of investments this year, helping the overall China recovery story.”

HSBC Holdings Plc and Markit Economics are due to release a preliminary manufacturing index for this month on March 21. The gauge may rise to 50.8 from 50.4 in February, according to the median estimate of 11 analysts in a Bloomberg survey. A reading above 50 indicates expansion.

Utilities Gain

The Shanghai gauge was valued at 9.2 times estimated earnings for the next 12 months yesterday, the lowest level since Dec. 13, according to data compiled by Bloomberg. Trading volumes were 28 percent lower than the 30-day average today, according to Bloomberg data. Thirty-day volatility in the gauge was at 21.4, close to the highest in a year.

A measure of utilities in the CSI 300 advanced 2.7 percent, the most among the 10 industry groups. Huaneng Power, the listed unit of China’s largest power group, gained 2.8 percent to 7.08 yuan. Huadian Power International Corp., the listed unit of the fourth-biggest power producer, climbed 2.5 percent to 4.57 yuan. China Resource Power Holdings Co. jumped 9.3 percent in Hong Kong after reporting net income for 2012 that exceeded forecasts yesterday.

“China Resources Power significantly outperformed market consensus and to some extent make investors believe that other bigger coal-fired power suppliers will also report higher-than- expected results,” Shi Yan, an analyst at UOB-Kay Hian in Shanghai, said by phone.

Developers’ Earnings

Merchants Property added 5.3 percent to 2444 yuan after net income jumped 28 percent from a year earlier in 2012. The earnings per-share of 1.932 yuan beat the estimate of 1.917 yuan, according to data compiled by Bloomberg.

China Vanke Co., the nation’s biggest listed property developer, rose 2.4 percent to 10.95 yuan. Poly Real Estate Group Co. (600048), the second largest, added 4 percent to 11.19 yuan.

A gauge of pharmaceutical stocks slid 1 percent, the second-biggest loss among the CSI 300’s industry groups. The index had gained 17 percent through yesterday this year.

Shanghai Fosun Pharmaceutical (Group) Co. (600196) fell 2.7 percent to 11.32 yuan. Zhejiang Medicine Co. lost 2.1 percent to 21.63 yuan. Kangmei Pharmaceutical Co. slid 1.3 percent to 15.88 yuan.

Anhui Jianghuai Automobile Co., a unit of China’s biggest light-truck exporter, tumbled by the 10 percent daily limit to 6.41 yuan. The carmaker will recall 117,072 Tongyue model cars starting March 30, the nation’s quality regulator said on its website today, after China Central Television reported the company sold vehicles with rusted chassis.

--Zhang Shidong. With assistance from Weiyi Lim in Singapore. Editors: Allen Wan, Chan Tien Hin

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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