China’s Stock Index Rises; Automakers Gain, Metal Producers Drop

China’s benchmark stock index rose as automakers and airlines gained on speculation lower commodity prices will reduce costs. Metal producers declined.

SAIC Motor Corp. (600104) added 1.1 percent and China Southern Airlines Co. advanced 2.3 percent. Jiangxi Copper Co. (600362) lost 1.7 percent as a plunge in copper prices dragged the metal toward a bear market. Shandong Dong-E E-Jiao Co. slumped the most since November 2008, leading a decline by health-care stocks.

The Shanghai Composite Index (SHCOMP) added 0.2 percent to 2,197.60 at the close. About 11 stocks fell for every 10 that rose on the gauge. Trading volumes were 26 percent lower than the 30-day average, according to data compiled by Bloomberg. Thirty-day volatility on the gauge was at 15.3, the lowest level since Dec. 4. The CSI 300 Index gained 0.3 percent to 2,464.85, while the Hang Seng China Enterprises Index (HSCEI) slid 0.3 percent in Hong Kong.

“The slowing trend in China’s economy isn’t over and the decline in global metal prices has curtailed the appetite for risk assets,” said Wei Wei, an analyst at West China Securities Co. in Shanghai.

The Bloomberg China-US 55 Index (CH55BN) tumbled 2.4 percent in New York yesterday as telecom providers and industrial companies dropped on speculation slower economic growth will erode company earnings.

The Shanghai Composite has fallen 9.7 percent from a Feb. 6 high amid concern measures to cool property prices will hurt economic growth. A government report today showed home prices rose in 68 of 70 cities tracked by the government, the most since September 2011. Valuations on the Shanghai gauge dropped to 9 times projected 12-month earnings, compared with the seven- year average of 15.8, data compiled by Bloomberg show.

Government Debts

China will strive to effectively prevent risks in local government-based debt, according to a State Council meeting chaired by Premier Li Keqiang yesterday. Local government debt is “out of control” and could spark a bigger financial crisis than the U.S. housing market crash, the Financial Times reported yesterday, citing Zhang Ke, vice chairman of China’s accounting association.

SAIC, China’s largest carmaker, gained 1.1 percent to 15.60 yuan. Chongqing Changan Automobile Co. (000625), the Chinese partner of Ford Motor Co. and Mazda Motor Corp., added 2 percent to 10.38 yuan after saying net income increased 49 percent from a year earlier in 2012. China Southern, the nation’s biggest carrier by fleet size, gained 2.3 percent to 3.56 yuan.

West Texas Intermediate crude fluctuated near the lowest level in four months. Copper plunged through $7,000 a metric ton in London for the first time in almost 18 months and headed for a bear market.

Copper Producers

A measure of material stocks in the CSI 300 fell 0.5 percent. Jiangxi Copper, China’s biggest producer of the metal, dropped 1.7 percent to 20.28 yuan. Tongling Nonferrous Metals Group Co. (000630), the second largest, slid 1.8 percent to 15.20 yuan.

A gauge of pharmaceutical stocks slumped 0.8 percent, the biggest retreat among the CSI 300’s 10 industry groups. Today’s decline trimmed the index’s gain to 15 percent this year. Shandong Dong-E, a maker of traditional Chinese medicine, tumbled 8.3 percent to 42 yuan. Jiangsu Hengrui Medicine Co. (600276) sank 2.1 percent to 29.79 yuan.

The yuan retreated from a 19-year high after the central bank lowered the daily reference rate by the most since August. The band in which the yuan is allowed to fluctuate, currently 1 percent, will be widened “in the near future,” Deputy Governor Yi Gang said yesterday at an International Monetary Fund conference in Washington.

The Bloomberg China-US Equity Index has slumped 13 percent in 2013 to trade at 11.7 times estimated earnings, about 50 percent below their valuation in March 2012. The iShares FTSE China 25 Index Fund (FXI) dropped 2.1 percent in New York.

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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