China’s Stocks Rise for Second Weekly Gain; Gemdale, Chalco Jump

China’s stocks rose, capping a second week of gains for the benchmark index, as property companies climbed after Gemdale Corp. (600383) reported higher sales and Aluminum Corp. of China Ltd. announced an asset-sale plan.

Gemdale climbed 2.6 percent after sales jumped 20 percent last month. Aluminum Corp., the biggest producer of the metal, rose 1.7 percent on a plan to sell 8.18 billion yuan ($1.3 billion) of assets. Guangzhou Automobile Group Co. (601238) jumped 10 percent after sales increased. ZTE Corp. (000063) slid 2.3 percent, paring this week’s gains to 6.1 percent. A measure of phone stocks rallied the most this week among 10 industry groups.

The Shanghai Composite Index (SHCOMP) rose 0.6 percent to 2,246.83 at the close, extending this week’s gain to 1.9 percent, before the release of data on industrial output, fixed-asset investment and retail sales on May 13. Trading volumes on the index were 2.9 percent higher than the three-month average, according to data compiled by Bloomberg.

“We’ll probably see some rebound in April economic data such as industrial production but the rebound won’t be big,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “This at least assures investors that the economy won’t deteriorate for the time being.”

The CSI 300 added 0.5 percent to 2,540.84 today. The Hang Seng China Enterprises Index (HSCEI) climbed 0.6 percent. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, fell 0.2 percent in New York yesterday on concern the Federal Reserve will step back from more stimulus.

Phone Stocks

This week’s gain for the Shanghai Composite pared losses since it reach a peak on Feb. 6 to 7.7 percent. The index trades at 9.8 times estimated earnings, compared with the three-year average of 11.9, data compiled by Bloomberg show. The MSCI Emerging Markets Index trades at 11 times earnings.

Data on new loans and money supply may be released today. Growth in Chinese factory production probably accelerated to 9.4 percent in April from 8.9 percent in the previous month, while retail sales increased 12.8 percent from 12.6 percent in March, according to Bloomberg surveys. This week’s economic reports showed exports growing faster than expected, inflation accelerating more than forecast and producer prices slumping.

China can’t be “blindly optimistic” about its inflation outlook at a time when uncertainties remain in areas such as property and farm produce prices, the People’s Bank of China said in its first-quarter monetary policy report. The government will continue to pursue a prudent monetary policy to keep prices stable, it said.

Rate Outlook

A rebound for inflation makes policy easing unlikely, with any cut in interest rates possibly stoking property speculation, Zhang Zhiwei, an economist at Nomura Holdings Inc., wrote in a report. The central bank won’t lower rates at least in the first half because of threats from property prices and inflation, Market News International reported, citing an unidentified person close to the People’s Bank of China.

Chalco, as Aluminum Corp. is known, gained 1.7 percent to 4.09 yuan. The sale of stakes in its aluminum-fabrication units will “optimize the asset structure, lower the debt-to-asset ratio and improve the debt portfolio of the company,” the company said yesterday. Most of the assets will be purchased by Chalco’s parent.

Gemdale rose 2.6 percent to 7.42 yuan after saying contracted sales increased 20 percent from a year earlier to 2.73 billion yuan ($444.6 million). China Vanke Co., the nation’s biggest listed property developer, added 1.4 percent to 11.75 yuan. Poly Real Estate Group Co., the second biggest, climbed 1.1 percent to 12.11 yuan.

Guangzhou Automobile surged by the daily maximum limit to 6.78 yuan. The company’s sales rose to 76,349 vehicles in April, up from 61,176 vehicles a year earlier.

A gauge of phone stocks fell 0.2 percent today, paring this week’s gains to 5.4 percent. ZTE dropped 2.3 percent to 12.97 yuan today. Fiberhome Telecommunication Technologies Co. slumped 3.3 percent to 28.76 yuan.

The 14-day relative strength measure for the sub-index, measuring how rapidly prices have advanced or dropped during a specified time period, was at 73.4 yesterday. Readings above 70 indicate a price may be poised to fall.

--Zhang Shidong. Editors: Allen Wan, Richard Frost

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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