China’s Stocks Rise Before Holiday, Led by Property Developers

China’s stocks rose for the first time in four days, led by Shanghai-based companies and property developers. Trading volumes slid before the start of holidays.

Shanghai Lujiazui Finance & Trade Zone Development Co. (600663) and CTS International Logistics Corp. jumped 10 percent on speculation Shanghai’s free-trade zone will increase demand for trade and shipping. Poly Real Estate Group Co. (600048), the nation’s second-biggest developer, advanced 0.7 percent after new home prices surged in the nation’s four major cities. Goertek Inc. (002241), an Apple Inc. supplier, led declines for technology stocks.

“The free-trade zone concept is what big players like to leverage on and any related stocks can expect to be active,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “Trading was light because investors want to guard against policy uncertainty and breaking news during holidays.”

The Shanghai Composite Index (SHCOMP) added 0.3 percent to 2,191.85 at the close. Trading volumes were 18 percent lower than the 30-day average, according to data compiled by Bloomberg. Beijing and Shanghai home prices climbed 15 percent last month, while in Shenzhen they gained 18 percent, the National Bureau of Statistics said. Chinese markets will close on Sept. 19 and 20 for the mid-Autumn festival and Oct. 1 to 7 for National Day holidays.

The Shanghai index has risen 12 percent from this year’s low on June 27 as data ranging from exports to industrial output showed growth is accelerating and as companies based in the city surged after the State Council approved a free-trade zone.

Trade Zone

The CSI 300 Index added 0.2 percent to 2,432.51. The Hang Seng China Enterprises Index (HSCEI) retreated 0.4 percent. The Bloomberg China-US Equity Index, the measure of the most-traded U.S.-listed Chinese companies, added 0.1 percent in New York yesterday. The Shanghai index is valued at 8.8 times its projected 12-month earnings, compared with the five-year average of 12.6 times, according to data compiled by Bloomberg.

Shanghai Lujiazui jumped by the daily limit to 20.55 yuan. CTS International added 10 percent to 16.56 yuan. Shanghai-based China Eastern Airlines Corp. surged 2.6 percent to 3.11 yuan. The three companies have posted gains ranging from 30 percent to 110 percent since Aug. 22, when China’s commerce ministry said the government approved a free-trade zone in Shanghai.

Shanghai Pudong Development Bank Co. (600000) rose 1.6 percent to 11 yuan after it submitted plans to regulators to set up a branch in the trade area. Detailed guidelines for the Shanghai zone will be delayed until the official launch of the zone at the end of the month and gradually released later in the year and next year, the China Daily reported today.

Bubble Stocks

While Barclays Plc predicts the free-trade zone will help turn Shanghai into a global hub for finance and shipping, Bank Julius Baer & Co. says the rally is unjustified because the government hasn’t announced details and any boost to profits may take years to materialize.

“These concept stocks are of course a bubble,” Andy Xie, one of the 50 most influential people in global finance according to this year’s ranking by Bloomberg Markets magazine, said in a phone interview from Hong Kong on Sept. 12. “The free-trade zone will take a long time to develop and earnings will show only years down the road.”

Poly Real Estate rose 0.7 percent to 10.66 yuan. Gemdale Corp. (600383) climbed 0.6 percent to 6.26 yuan. China Merchants Property Development Co. added 1.5 percent to 25.76 yuan.

Home Prices

New home prices in China’s four major cities jumped in August by the most since January 2011, led by Guangzhou, on expectations that the government won’t implement new nationwide property curbs any time soon. Prices climbed in 69 of the 70 cities the government tracked last month from a year earlier, the National Bureau of Statistics said.

Rising property prices will constrain room for further easing of monetary policies and the government may start tightening monetary and property industry policies after the Communist Party meeting in November, Zhang Zhiwei, an economist at Nomura Holdings Inc. in Hong Kong, wrote in a note.

A measure of technology stocks in the CSI 300 fell 0.8 percent for the biggest loss among the 10 industry groups. GoerTek slumped 1.8 percent to 38.13 yuan. Neusoft Corp. (600718) plunged 2.5 percent to 11.10 yuan.

EGing Photovoltaic Technology Co. led declines for solar companies, tumbling 9.5 percent to 11.76 yuan. Zhejiang Sunflower Light Energy Science & Technology Co. (300111) lost 2.9 percent to 4.33 yuan.

The government will control the construction of new photovoltaic manufacturing projects to curb excess capacity in the world’s biggest maker of solar panels, while new producers that expand capacity will be banned, the Ministry of Industry and Information Technology said yesterday. A global oversupply of solar panels led to a 20 percent plunge in average prices last year, according to data compiled by Bloomberg.

--Zhang Shidong. Editors: Allen Wan, Richard Frost

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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