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China’s Stock Futures Rise After Manufacturing Strengthens

China’s stock-index futures rose, signaling gains for the benchmark index, after manufacturing unexpectedly strengthened last month.

Futures on the CSI 300 Index (SHSZ300) expiring in August climbed 0.6 percent to 2,183.60 as of 9:15 a.m. local time. Zhejiang Yonggui Electric Equipment Co. (300351), a maker of rail transit connectors, and Xinjiang Guotong Pipeline Co. may advance after the government said it will boost construction of urban infrastructure to maintain economic growth. Baoshan Iron & Steel Co. (600019) may move after the National Business Daily reported China may cut almost half of the nation’s steel output to remove overcapacity.

The Shanghai Composite Index (SHCOMP) added 0.2 percent to 1,993.80 yesterday, capping a 0.7 percent gain last month. The CSI 300 Index rose 0.2 percent to 2,193.02. The Hang Seng China Enterprises Index (HSCEI) retreated 0.1 percent. The Bloomberg China-US 55 Index added 0.3 percent in New York.

The Purchasing Managers’ Index was at 50.3, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. That compared with the 49.8 median forecast of 35 analysts in a Bloomberg News survey and June’s 50.1 level. Readings above 50 indicate expansion.

Improvements at manufacturers would help Premier Li Keqiang achieve the year’s 7.5 percent expansion goal as he tries to support the economy with tax breaks for small companies and reduced fees for exporters. Leaders pledged at a Politburo meeting this week to maintain steady second-half growth while pressing on with economic reforms.

Steel Capacity

China will build subways and light rails, the State Council said in a statement issued after a regular meeting in Beijing yesterday. The cabinet also studied outsourcing some public services, according to the statement. No details were given on which services.

“We believe the announcement to purchase public services from non-government entities is a new idea in the right direction, as it helps to open up a monopolised sector to private investment,” Zhang Zhiwei, economist at Nomura Holdings Inc., wrote in a note to clients. “But the scale and scope of this new initiative is unclear, and it is unknown how effectively it can be implemented.”

Baoshan Steel may be active among steelmakers. China may cut almost half of the total 970 million tons of steel output, the National Business Daily reported today, citing an unidentified person who saw a draft plan made by the National Development and Reform Commission and the Ministry of Industry and Information Technology.

For the year, the Shanghai Composite is down 12 percent on concern slowing growth will damp earnings. The measure trades at 8.1 times 12-month projected profit, approaching the lowest level in at least five years, data compiled by Bloomberg show.

Internet Stocks

Trading volumes in the Shanghai index were 27 percent lower than the 30-day average while 30-day volatility was at 25.7, near the highest level since December 2010, according to data compiled by Bloomberg.

Chinese stocks rose in July in New York for the biggest gain in 18 months yesterday, led by Internet companies, as shares of NQ Mobile Inc. doubled after deals with Baidu Inc. and China Mobile Ltd. boosted its outlook.

The Bloomberg China-US Equity Index climbed 7.6 percent last month, the biggest jump since January 2012. The gauge, in which Internet and technology companies have a weighting of 45 percent, outperformed benchmark indexes for Chinese stocks in Shanghai and Hong Kong last month.

“Even though China’s economic growth is slowing down, the Internet space is a secular growth story and they are usually less impacted by the overall economics,” Andy Yeung, an Internet stock analyst at Oppenheimer & Co. in New York, said by phone.

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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