The Shanghai Composite Index (SHCOMP) rose after China Petroleum and Chemical Corp. jumped the most in 11 months and cement and utility companies rallied, overshadowing a report showing faster inflation.
China Petroleum, known as Sinopec, surged 4.6 percent after valuations dropped to a record low. Jiangxi Wannianqing Cement Co. (000789) climbed the most this year after estimating first-half profit probably more than doubled. GD Power Development Co. led gains for utilities after saying rising electricity prices will boost a unit’s revenue. Kweichow Moutai Co. and Poly Real Estate Group Co. paced losses for consumer-staples and property shares.
The benchmark Shanghai Composite added 0.4 percent to 1,965.45 at the close, after plunging 2.4 percent yesterday. The CSI 300 Index slid less than 0.1 percent to 2,162.67. The consumer price index rose 2.7 percent in June, the National Bureau of Statistics said, compared with a median estimate of 2.5 percent in a Bloomberg News survey. Producer prices fell 2.7 percent, extending their longest losing streak in a decade.
“The CPI and PPI figures weren’t much of a surprise and the market has reached a consensus that the economy will remain flat going forward,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Most of the bad news from the economic front has been priced in and the market is focused on companies’ earnings now.”
The Hang Seng China Enterprises Index (HSCEI) fell 0.2 percent. Trading volumes in the Shanghai index were 33 percent lower than the 30-day average, while 30-day volatility was at 22.9, near a three-month high, according to data compiled by Bloomberg.
The Shanghai measure has lost 13 percent this year as data from industrial production to exports pointed to a sustained slowdown in the economy and as money-market rates reached record highs. The index trades at 8.1 times 12-month projected profit after valuations fell last month to the lowest level in at least five years, data compiled by Bloomberg show.
China’s inflation remained below the government’s target in June, while the decline in factory-gate prices extended its longest streak in a decade amid overcapacity and lower commodity costs. The government in March said it would aim to keep price gains to about 3.5 percent this year.
“Despite the bigger-than-expected rebound in CPI inflation, the 2.7 percent CPI inflation reading is still moderate and PPI inflation is still quite negative, so these inflation readings won’t become significant constraints for policymaking at the moment,” Lu Ting, economist at Bank of America Corp., wrote in a report today.
UBS AG cut its year-end target for the CSI 300 to 2,300. Given no further changes to current policies, “we are more cautious” on the market in the second half, Chen Li, a strategist at UBS, wrote in a report dated today. UBS cut its earnings growth estimate to 8.7 percent for this year from the previous forecast of 11.5 percent. Chinese companies are scheduled to report first-half earnings from this month.
Sinopec, the biggest oil refiner in Asia, surged 4.6 percent to 4.33 yuan. The stock accounted for 34 percent of the index’s gain today, according to data compiled by Bloomberg. Sinopec trades at 6.3 times estimated earnings for this year, a record low, data compiled by Bloomberg showed.
“Sinopec’s valuation is very attractive now and all bad news have been exhausted.” says Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai. “There is a good chance the stock will rebound a bit when the overall market stabilizes.”
Jiangxi Cement soared by the maximum daily limit of 10 percent to 8.48 yuan. The company said first-half profit probably jumped between 120 percent and 140 percent from a year earlier. Gansu Qilianshan Cement Group Co. (600720) gained 6.2 percent to 8.29 yuan. Huaxin Cement Co., the Chinese affiliate of Holcim Ltd., added 1.4 percent to 10.12 yuan.
A measure of utilities in the CSI 300 rose 1 percent, the most among 10 industry groups. GD Power climbed 1.8 percent to 2.24 yuan after saying this year’s revenue for a unit will increase by about 170 million yuan ($27.7 million) after the National Development and Reform Commission raised power prices.
The ChiNext index of start-up companies jumped 2 percent. Smaller stocks will continue to outperform in the second half as the central bank keeps neutral monetary policies and economic growth is unlikely to pick up, Liu Hui, a fund manager at HSBC Jintrust Fund Management Co., said in an e-mailed interview. Liu’s HSBC Low Carbon Pioneer Fund returned 42 percent this year, the second-best performing China-based stock fund through July 2, according to data compiled by Bloomberg.
Shanghai’s property sub-index lost 1.7 percent. Poly Real Estate, China’s second-largest developer by market value, dropped 2.8 percent to 10.12 yuan. China Vanke Co., the biggest, fell 3.4 percent to 9.66 yuan.
Kweichow Moutai led declines for consumer-staples producers, dropping 1.6 percent to 192.05 yuan. Jiangsu Yanghe Brewery Joint-Stock Co. slid 1.4 percent to 50.17 yuan. Anhui Gujing Distillery Co. lost 2.7 percent to 19.49 yuan.
The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, fell 0.1 percent in New York yesterday.
--Zhang Shidong. With assistance from Guo Aibing in Hong Kong. Editors: Allen Wan, Richard Frost
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