China’s Stocks Rise Most in Week on Reform Speculation, Earnings

China’s stocks rose, with a gauge of utilities surging the most in two years, on speculation the government will introduce measures to boost economic growth at a Communist Party meeting and after the largest oil companies reported increased profit.

Datang International Power Generation Co. led a rally for power producers after profits jumped. A measure of consumer-discretionary shares climbed the second most among 10 industry groups, as companies ranging from Gree Electric Appliances Inc. (000651) to SAIC Motor Corp. surged at least 3 percent. PetroChina Co. gained the most in four months after posting a 19 percent increase in profit. China Petroleum & Chemical Corp. (386) jumped 3.5 percent as Morgan Stanley said shares may “re-rate” after the company’s earnings beat estimates.

The Shanghai Composite Index rose 1.5 percent to 2,160.46 at the close, the biggest gain since Oct. 21. The Communist Party said a key meeting to discuss economic-policy reforms will run for four days through Nov. 12. Politburo member Yu Zhengsheng has said reforms to be discussed will be unprecedented.

“With the dates set for the plenum, there would be more hopes for reforms soon so that will support the market from falling too much,” said Zhang Gang, strategist at Central China Securities in Shanghai. “Company earnings are not performing too badly.”

The Shanghai measure rebounded from a seven-week low and pared this month’s loss to 0.7 percent. It has slumped 4.8 percent this year on concerns a slowing economy will hurt profit growth and the government will introduce measures to curb property-price gains. The index trades at 8.5 times projected profits for the next 12 months, lower than the seven-year average of 15.4. The ChiNext index of small companies added 0.9 percent, paring this month’s drop to 6.9 percent.

Reform Hopes

The CSI 300 Index rose 1.5 percent to 2,407.47 today, while the Hang Seng China Enterprises Index (HSCEI) climbed 1.3 percent. The Bloomberg China-US Equity Index gained 1.7 percent in New York yesterday. Trading volumes in the Shanghai index were 19 percent below the 30-day average, according to data compiled by Bloomberg.

Analysts surveyed by Bloomberg News this month said policies flowing from the Communist Party meeting will reduce the odds of a severe slowdown or financial crisis and are most likely to include changes in financial markets and local-government funding.

The government may announce measures to boost domestic consumption at the meeting, benefiting auto, dairy and home-appliance companies, said Lilian Leung, who manages almost $1 billion at JPMorgan Asset Management in Hong Kong.

Consumer Companies

SAIC Motor, the biggest automaker, jumped 3.8 percent to 14.42 yuan. Gree Electric surged 6.2 percent to 31.26 yuan. Suning Commerce Group Co., the largest electronics retailer, added 3 percent to 11.89 yuan.

Premier Li Keqiang has championed urbanization as a “huge engine” for growth as he seeks to shift the country toward a model that relies on consumption rather than investment and exports.

A gauge of utility stocks in the CSI 300 jumped 4.3 percent, the most among 10 industry groups. Datang International Power Generation surged 4.4 percent to 4.56 yuan after reporting a third-quarter net income of 1.79 billion yuan, compared with the median estimate of 1.3 billion yuan. Huaneng Power International Inc. (902) rose 5.2 percent to 5.85 yuan.

China Petroleum, known as Sinopec, advanced 3.5 percent to 4.49 yuan after it reported a 20 percent jump in net income to 22 billion yuan ($3.6 billion) yesterday. Sinopec shares are likely to “re-rate” after “decent” earnings (SHCOMP), Morgan Stanley analysts Andy Meng and Daisy Li wrote in a note.

Money Rates

PetroChina gained 2.2 percent to 7.78 yuan after it posted a 19 percent gain in profit to 29.8 billion yuan. The energy companies increased profit in the third quarter as a new policy helped them raise fuel prices, foreshadowing Premier Li Keqiang’s plan to reduce state intervention in the economy.

The nation may also allow private capital to invest in oil and gas resources currently controlled by several large oil companies with monopoly power, the China Securities Journal reported today, citing unidentified people.

Earnings at the 199 companies in the Shanghai gauge tracked by Bloomberg that reported results so far this quarter have trailed analyst estimates by 6.4 percent.

China’s benchmark money-market rate rose to four-month highs even after the central bank injected funds for the first time in almost two weeks yesterday.

The seven-day repurchase rate, a gauge of funding availability in the banking system, climbed 38 basis points to 5.42 percent, according to a weighted average compiled by the National Interbank Funding Center. It touched 5.43 percent, the highest since July 1. The overnight repo rate jumped 53 basis points to 5.11 percent.

Liquidity may remain tight and balanced in the fourth quarter and the nation may mainly adopt short-term adjustments in its monetary policy, according to a front page commentary in the China Securities Journal.

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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