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China Stocks Rise on Industrial Output; Volumes Hit 3-Year High

China’s stocks rose, with trading volumes on the benchmark index jumping to the highest levels since October 2010, as better-than-estimated industrial production data signaled a turning point for the economy.

Citic Securities Co., the nation’s biggest-listed brokerage, posted its biggest two-day gain in five years. China Eastern (600115) Airlines Corp. and China Shipping Container Lines Co. jumped 9.9 percent, leading a rally for industrial shares on speculation the Shanghai Free-Trade Zone will turn the city into a global shipping hub. Guangzhou Shipyard International Co. (600685) gained 6.5 percent after the South China Morning Post reported Guangdong province is studying a plan to create a trade zone.

The Shanghai Composite Index (SHCOMP) rose 1.2 percent to 2,237.98 at the close, the highest level since June 6. The Hang Seng China Enterprises Index (HSCEI) climbed 1.2 percent, rebounding 20 percent from a June 25 low. China’s industrial output gained 10.4 percent last month, compared with the estimate for 9.9 percent growth in a Bloomberg News survey.

The economic data “show the recovery is well on track,” said Dai Ming, a money manager at Hengsheng Hongding Asset Management Co. “Investors’ expectations about stronger growth are building up.”

Trading volumes on the Shanghai Composite surged to 23.7 billion, the highest level since Oct. 18, 2010. Citic Securities led gains for brokerages on speculation increased trading will boost earnings. Citic Securities rose 10 percent today for a two-day gain of 18 percent. Haitong Securities Co., the second-biggest brokerage, added 3.5 percent to 13.03 yuan.

Economic Outlook

The CSI 300 Index advanced 1.4 percent to 2,474.89. The Bloomberg China-US Equity Index, the measure of the most-traded U.S.-listed Chinese companies, added 1.8 percent in New York yesterday. The Shanghai Composite is valued at 9 times its projected 12-month earnings, the highest since June 11, according to data compiled by Bloomberg.

The Shanghai index has risen 15 percent since reaching this year’s low on June 27 as data ranging from exports to manufacturing and money supply signaled the economy is stabilizing. An official manufacturing gauge jumped to a 16-month high in August. A report last weekend showed exports rose 7.2 percent in August, beating estimates.

The advance in industrial production compared with a 9.7 percent increase in July, according to the National Bureau of Statistics. Retail sales gained 13.4 percent, compared with the median analyst projection for a 13.3 percent advance. Fixed-asset investment excluding rural households in the first eight months of the year increased 20.3 percent, compared with the estimate for 20.2 percent expansion.

Trade Zone

A measure of industrial stocks in the CSI 300 advanced 2.5 percent, the most among the 10 industry groups. China Eastern, the nation’s second-largest carrier, surged 9.9 percent to 3.34 yuan. Air China Ltd. (601111), the country’s largest international carrier, advanced 4.5 percent to 4.39 yuan. Shanghai International Airport Co., operator of the second-busiest airfield, climbed 4.6 percent to 16.70 yuan.

“China’s recent statistics are showing the economy is strengthening and this added to the momentum in the market,” said Li Lei, an analyst at China Minzu Securities Co. in Beijing. “The optimism towards the Shanghai free-trade zone also spread from Shanghai-based companies to their peers such as Air China.”

China announced last month its cabinet had approved the plan to set up the first free-trade zone on 29 square kilometers (11 square miles) in Shanghai, describing it as a crucial move in adapting to global economic and trade development and the opening up the world’s second-largest economy.

Guangdong Zone

China Shipping Container, the country’s second-largest carrier of sea-cargo boxes, surged 9.9 percent to 3 yuan. Cosco Shipping Co. (600428), a unit of China’s biggest shipping company, jumped 10 percent to 4.38 yuan. The Baltic Dry Index, the benchmark of commodity shipping rates, surged 9.3 percent yesterday, the most since June 2009.

The Guangdong free-trade zone, which would include Hong Kong and Macau, was proposed by provincial Party Secretary Hu Chunhua at a forum in Guizhou province yesterday, the South China Morning Post reported, citing Hu and Hong Kong Chief Executive Leung Chun-ying.

Guangzhou Shipyard, the smaller unit of China’s biggest shipbuilder, added 6.5 percent to 12.38 yuan. Guangzhou Baiyun International Airport Co. (600004) jumped 7.3 percent to 7.52 yuan. Guangshen Railway Co., the operator of trains in China’s richest province, surged 10 percent to 3.31 yuan.

Agricultural Bank of China Ltd. (601288) led declines for lenders, falling 1.5 percent to 2.68 yuan. Agricultural Bank and Shanghai Pudong Development Bank (600000) Co. haven’t been notified of any trials for preferred shares, the Shanghai Securities News reported today, citing unidentified employees at the two banks. Agricultural Bank and Shanghai Pudong Bank rallied yesterday after Moneyweek reported the banks may participate in a trial allowing lenders to raise funds through preferred shares.

--Zhang Shidong. With assistance from Jasmine Wang in Hong Kong. Editors: Allen Wan, Matthew Oakley

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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