China’s Stock Index Rises to Three-Month High Amid Credit Growth

China’s benchmark stock index rose to a three-month high after credit growth rebounded and brokerages from Deutsche Bank AG to UBS AG boosted their forecasts for the nation’s economic expansion.

Aluminum Corp. of China Ltd., also known as Chalco, surged 9.9 percent, driving a gauge of material stocks to the biggest gain among industry groups. China Shipping Container Lines Co. advanced to a two-year high as a benchmark of commodity shipping rates surged to the highest since January 2012. Suzhou Anjie Technology Co., a supplier to Apple Inc., paced declines for technology shares and smaller companies.

The Shanghai Composite Index (SHCOMP) rose 0.2 percent to 2,241.27 at the close, the highest level since June 6. China’s broadest measure of new credit almost doubled in August from the previous month, while M2 money supply growth accelerated to 14.7 percent, the fastest in three months. UBS and Deutsche Bank raised their growth estimates after yesterday’s industrial production data.

“The recent economic data are pretty strong and that reinforces investors’ expectations that the economic recovery is well on track,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages $120 million. “That’ll boost demand for risk assets such as stocks.”

The CSI 300 Index climbed 0.3 percent to 2,482.89. The Hang Seng China Enterprises Index slipped 0.4 percent after entering a bull market yesterday with a 21 percent rebound from the June 25 low. The ChiNext index of start-up companies fell 3.4 percent. The Bloomberg China-US Equity Index added 1.7 percent in New York yesterday.

Material Shares

The Shanghai index has risen 15 percent since reaching this year’s low on June 27 amid data showing growth is accelerating and as shippers and port operators rallied after the State Council approved Shanghai’s Free-Trade Zone. Trading volumes were 97 percent above the 30-day average today.

Shanghai stocks will follow their Hong Kong peers into a bull market by next month as the world’s second-biggest economy rebounds and the government eases restrictions on capital flows, said Bank of Communications Co.

“The free-trade zone and preference shares trial, coupled with the economic recovery, will get us there,” said Hao Hong, Hong Kong-based strategist at BoCom, referring to speculation the government will allow lenders to sell preferred shares to boost capital. “It will most likely be before mid-October.”

A measure of material stocks in the CSI 300 advanced 1.9 percent today, the most among the 10 industry groups.

Chalco, the listed unit of nation’s biggest maker of the lightweight metal, surged 9.9 percent to 3.98 yuan. Yunnan Copper Industry Co. (000878), the fourth-biggest producer of the metal, added 6.9 percent to 10.59 yuan. Hebei Iron & Steel Co. rose 4.9 percent to 2.14 yuan.

Economic Indicators

Premier Li Keqiang said yesterday at a meeting in the northern city of Dalian that August indicators have shown a trend of recovery. Monetary easing, adjusting macroeconomic policies and increasing the deficit may have an impact in the short run yet won’t necessarily be beneficial in future, he said, according to the official Xinhua News Agency.

China’s broadest measure of new credit almost doubled in August from the previous month. Aggregate financing was 1.57 trillion yuan ($257 billion), the People’s Bank of China said yesterday after the market closed, topping the 950 billion yuan median estimate of 10 analysts surveyed by Bloomberg News. Data released yesterday also showed industrial production and fixed-asset investment beat economists’ estimates last month.

Stock Valuations

UBS raised its estimate for China’s gross domestic product growth in 2013 to 7.6 percent from 7.5 percent, while Deutsche Bank boosted its forecast for growth in the third quarter to 7.9 percent from the previous 7.7 percent. Deutsche Bank also increased its estimates for the fourth quarter and 2014.

China Shipping Container, the country’s second-largest carrier of sea-cargo boxes, jumped 10 percent to 3.30 yuan, the highest close since August 2011. China Cosco Holdings Co. (601919), the biggest shipping company, rose 5 percent to 3.80 yuan. The Baltic Dry Index gained 4.3 percent yesterday to the highest since January 2012.

Suzhou Anjie slumped 10 percent to 41.41 yuan. GoerTek Inc. (002241), which also supplies to Apple, tumbled 10 percent to 37.18 yuan. Apple introduced two new iPhones, including a cheaper $99 version in bright colors and an updated high-end device.

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 14-day relative strength measure, measuring how rapidly prices have advanced or dropped during a specified time period, was at 79.6 today. Readings above 70 indicate a price may be poised to fall.

--Zhang Shidong. Editors: Allen Wan, Chan Tien Hin

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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