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China Stocks Rise to 2-Week High After Industrial Profit Growth

China’s stocks rose to a two-week high after a government report showed profit growth for industrial companies accelerated last month.

China Southern Airlines Co. (600029) led a rally for industrial companies after reporting profit. Shanghai International Port (Group) Co. jumped by the 10 percent daily limit for a third day after the central government approved a free-trade zone for the city. ZTE Corp. (000063) and Fiberhome Telecommunication Technologies Co. slid at least 1.2 percent after a measure of phone stocks reached a 17-month high yesterday. PetroChina Co. was suspended from Shanghai and Hong Kong trading pending an announcement.

The Shanghai Composite Index (SHCOMP) rose 0.3 percent to 2,103.57 at the close. Growth in profit for industrial companies quickened to 12 percent in July from 6.3 percent in June, the National Bureau of Statistics said today.

“The industrial profits data add to signs that the economy is stabilizing,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “The data will keep the index stable at current levels. There’s no major catalyst to drive stocks higher as the market has reached a consensus that it’s a weak recovery.”

The CSI 300 Index rose 0.2 percent to 2,340.88. The ChiNext index gained 1 percent to a record high in Shenzhen. The Hang Seng China Enterprises Index (HSCEI) lost 0.4 percent. Trading volumes in the Shanghai Composite were 27 percent higher than the 30-day average today, according to data compiled by Bloomberg.

Industrial Profit

The Shanghai Composite is valued at 8.5 times its projected 12-month earnings, compared with the five-year average of 12.7 times, according to data compiled by Bloomberg. The index is down 7.3 percent this year.

January to July profit for industrial companies rose 11 percent from a year earlier, the statistics bureau said. That compared with the same growth rate for January to June.

China Southern, the biggest domestic carrier, gained 3 percent to 2.78 yuan. Net income in the six months ended in June fell 19 percent to 344 million yuan ($56.2 million), the airline said yesterday. China Eastern Airlines Corp., the second-largest domestic carrier, surged 10 percent to 2.74 yuan. The airline is schedule to report earnings on Aug. 30.

Shanghai Port, the operator of the world’s second-busiest harbor, jumped 10 percent to 3.40 yuan. Shanghai Material Trading Co. surged 10 percent to 10.90 yuan. Shanghai Jinjiang International Hotels Development Co. (600754), the largest hotel operator, gained 5.4 percent to 14.70 yuan.

Trade Zone

The National People’s Congress has begun discussions on a draft proposal for the pilot Shanghai free-trade zone, the Xinhua News Agency reported, citing the legislative body. The zone will help Shanghai cut costs of trade, improve efficiency and promote financial services, Xinhua said.

Cosco Shipping Co. (600428), a unit of China’s biggest shipping company, fell 1 percent to 3.14 yuan after saying its first-half net loss widened to 78 million yuan from 23.6 million yuan a year earlier.

Of 158 Shanghai-listed companies that reported first-half earnings that Bloomberg tracks, 74 beat analyst estimates, 75 trailed and the rest were in line.

A measure of telecommunication stocks sank 0.8 percent, the most among the 10 industry groups in the CSI 300. It rose to the highest since March 2012 yesterday on optimism government measures to boost consumption of information technology and develop broadband will bolster earnings.

PetroChina Suspension

ZTE, China’s second-biggest phone-equipment maker, lost 1.2 percent to 17.20 yuan, trimming its gain this year to 76 percent. Fiberhome Telecommunication slipped 1.5 percent to 20.61 yuan.

PetroChina, the nation’s biggest energy producer, plans management changes at its Daqing oilfield in northeast China after a government probe of the unit’s top executive, said two people familiar with the situation.

An announcement may come later today, said the two people, who asked not to be named as they don’t have authority to disclose the news.

The Bloomberg China-US Equity Index, the measure of the most-traded U.S.-listed Chinese companies, fell 0.2 percent in New York yesterday after U.S. Secretary of State John Kerry said the president will hold Syria’s government accountable for using chemical weapons.

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

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