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China’s Stocks Rise for Fifth Day on Services Report

China’s (SHCOMP) stocks rose for a fifth day, capping their longest stretch of gains in two months, after a services gauge accelerated for the first time since March. Consumer, health-care and technology companies led the advance.

Shanghai Friendship Group Inc. and Chongqing Department Store paced a rally for retailers, jumping more than 4 percent. Dairy producer Inner Mongolia Yili Industrial Group Co. climbed 3.1 percent after the government halted imports of milk powder from Fonterra Cooperative Group Ltd. Drugmaker Yunnan Baiyao Group Co. advanced to the highest level in a week.

The Shanghai Composite Index rose 1 percent to 2,050.48 at the close. China’s economy is showing signs of stabilizing after a measure of the non-manufacturing sector rose to 54.1 in July from 53.9 in June, while a services index from HSBC Holdings Plc and Markit Economics was unchanged at 51.3. Readings above 50 indicate expansion.

“There’s less concern about economic growth after” the services data, said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. “Local milk makers are benefiting from the Fonterra import halt as earnings should get a boost.”

The CSI 300 Index advanced 1.4 percent to 2,278.33. The Hang Seng China Enterprises Index (HSCEI) rose 0.1 percent.

A measure of commercial enterprises in the Shanghai Composite including retailers jumped 1.7 percent for the biggest gain among five industry groups. Shanghai Friendship rose 4.8 percent to 6.96 yuan. Chongqing Department surged 5.6 percent to 18.07 yuan.

The non-manufacturing PMI was released by the National Bureau of Statistics and China Federation of Logistics and Purchasing. The index hasn’t dropped below 50 since a new data series started in March 2011. A gauge of business expectations in the survey rose to 63.9, the highest since December.

‘Good Start’

The non-manufacturing report indicates a “relatively good start to second-half economic activities,” Cai Jin, a vice chairman at the logistics federation, said in the Aug. 3 data release. “The foundation and conditions to ensure stable economic growth are there even though we continue to face challenges.”

HSBC and Markit’s services gauge indicates “China’s service sector has stabilized at a relatively low level of growth,” Qu Hongbin, HSBC chief China economist in Hong Kong, said in a statement.

A gauge tracking consumer-staples producers on the CSI 300 advanced 2 percent. Inner Mongolia Yili added 3.1 percent to 37.09 yuan. Zhejiang Beingmate Technology Industry & Trade Co., a milk-powder manufacturer, added 0.9 percent to 33.37 yuan. Fonterra, the world’s largest dairy exporter, said Aug. 3 that three batches of a whey protein made at a New Zealand plant last year may contain bacteria that can cause a rare illness called botulism.

Drugmakers

Kangmei Pharmaceutical Co. led gains for drugmakers, surging 6.4 percent to 21.90 yuan. Yunnan Baiyao climbed 1.8 percent to 107.70 yuan. The technology stock measure added 3 percent, gaining the most among the CSI 300’s 10 industry groups and taking its advance this year to 38 percent. Aisino Co. climbed 2.5 percent to 16.17 yuan. Sanan Optoelectronics Co. jumped 4.5 percent after Taiwan’s Ministry of Economic Affairs approved its acquisition of Formosa Epitaxy Inc.

The Shanghai Composite climbed 0.9 percent last week. It has dropped 9.6 percent this year. The measure trades at 8.3 times 12-month projected profit, data compiled by Bloomberg show.

Options traders are paying the least in six weeks to protect against drops in the largest Chinese exchange-traded fund in the U.S. on prospects the government will take steps to sustain growth in Asia’s biggest economy.

The cost of six-month puts on the iShares China Large-Cap ETF had a 3.4-point spread with calls Aug. 2, the smallest gap since June 19, options data compiled by Bloomberg showed.

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

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

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