China’s Stocks Rise After Biggest Slump in a Month

China’s stocks rose, lifting the Shanghai Composite Index (SHCOMP) from its biggest slump in a month, as gains by health-care and technology stocks overshadowed losses among property developers.

Sanan Optoelectronics Co. climbed to a two-year high, leading technology companies to the biggest gains among the CSI 300 Index’s industry groups. Yunnan Baiyao Group Co. (000538) added 3.9 percent. China CNR Corp. (601299) and CSR Corp. gained at least 1.7 percent after the China Securities Journal said China Railway Corp. may buy locomotives from the two companies. China Vanke Co., the nation’s biggest listed property developer, dropped.

The Shanghai Composite Index closed 0.6 percent higher at 2,288.53, taking its weekly gain to 0.3 percent. The gauge lost 1.2 percent yesterday, the most since April 23, as a HSBC Holdings Plc and Markit Economics report showed Chinese manufacturing contracted for the first time in seven months and as Japan’s stocks tumbled the most since March 2011. The Nikkei 225 Stock Average climbed 0.9 percent today after sliding 7.3 percent yesterday.

“The market is recovering from the bad sentiment caused by the big slump in Japan,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages $120 million. “Money will flow back to technology small-caps as investors mainly believe their earnings are less reliant on the economy.”

The CSI 300 Index rose 0.6 percent to 2,597.23. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong added 0.2 percent. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, fell 1.3 percent in New York yesterday.

Industrial Profits

Trading volumes in the Shanghai Composite were 9.9 percent above the 30-day average, data compiled by Bloomberg show. Thirty-day volatility was at 16.3, compared with this year’s average of 19.5, the data showed.

The index has rebounded 5.2 percent from this year’s low set on May 2. It trades at 9.3 times 12-month estimated earnings, compared with a seven-year average of 15.7 times, according to data compiled by Bloomberg.

The statistics bureau is scheduled to release data on industrial companies’ profits on May 27. A preliminary reading of a HSBC and Markit’s Purchasing Managers Index released yesterday was 49.6, below the 50 level that divides expansion and contraction.

A gauge of technology stocks in the CSI 300 added 2.6 percent today, the most among the 10 industry groups. Sanan Optoelectronics jumped 10 percent to 20.78 yuan, the highest close since March 2011. Yonyou Software Co. (600588) rose 4.2 percent to 10.94 yuan.

Developers Retreat

The CSI 300’s health-care sub-index gained 1.4 percent. Yunnan Baiyao rose 3.9 percent to 89.85 yuan. Beijing Tongrentang Co. (600085) advanced 2.8 percent to 23.67 yuan.

Vanke lost 0.8 percent to 11.91 yuan. Gemdale Corp. sank 1 percent to 7.78 yuan. Anhui Conch Cement Co., China’s biggest cement maker, slid 1.2 percent to 17.11 yuan.

Premier Li Keqiang rejected a $6.5 trillion urbanization proposal drafted by the National Development and Reform Commission as he sought changes “to put more emphasis on economic reform,” Reuters reported yesterday. The NDRC is working with other departments on a draft urbanization plan, the official Xinhua News Agency reported today.

Rail Stocks

“If the news is true, it shows the government’s tough attitude toward the real-estate industry as it slows the pace of construction,” said Dai Fang, a property analyst at Zheshang Securities Co. in Shanghai, by phone today.

CSR, China’s biggest train maker, rose 1.7 percent to 4.30 yuan. CNR, the second largest, added 2.3 percent to 4.55 yuan.

China Railway Corp. has expressed an intention to buy locomotives from the two companies, the China Securities Journal reported today, without saying where it got the information. CNR may win orders for 100 locomotives and 40 bullet trains, it said.

The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., lost 1 percent in New York yesterday to the lowest level since April 26. The Standard & Poor’s 500 Index slipped 0.3 percent.

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

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

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.