Most Chinese Stocks Rise After Service PMI Data

Most Chinese companies rose after an official government report showed service industries expanded at a faster pace in October. Property stocks declined.

ZTE Corp. and Beijing Zhongke Sanhuan High-Tech Co. surged more than 3 percent. Zhejiang Beingmate Technology Industry & Trade Co., a maker of baby formula, gained the most in two weeks after its controlling shareholder bought back shares. Beijing Orient National Communication Science & Technology Co. slid 10 percent after getting approval for a private placement. China Vanke Co., the biggest-listed developer, lost 2 percent.

Five stocks gained for every three that fell on the Shanghai Composite Index, which was was little changed at 2,149.64. The non-manufacturing Purchasing Managers’ Index (CPMINMAN) rose to 56.3 in October from 55.4 in September. That was the highest level this year and followed faster-than-estimated growth in two manufacturing indexes last week. China’s top party officials will meet from Nov. 9-12 to map out a blueprint for reform.

“Data over the weekend was all right,” said Mao Sheng, an analyst at Huaxi Securities Co. in Chengdu. “The market’s not going to do much before the plenum.”

The CSI 300 Index retreated 0.2 percent to 2,380.45 and the Hang Seng China Enterprises Index (HSCEI) increased 0.1 percent. The ChiNext index of smaller companies rose less than 0.1 percent.

President Xi Jinping said a blueprint for “comprehensive reform” will be put forward to the third plenary session of the Communist Party Central Committee, according to a Nov. 2 report from the official Xinhua News Agency.

Property Bubble

Telecommunications and technology stocks led gains on the CSI 300 index, advancing at least 1.5 percent. ZTE rose to 15.70 yuan. Beijing Zhongke Sanhuan jumped 4.1 percent to 13.51 yuan. Zhejiang Beingmate advanced 3.8 percent to 33.70 yuan.

China Vanke fell 2 percent to 9.20 yuan. China’s real estate bubble poses a “danger” to the economy and the government should combine property controls with economic reform of land and tax policies, according to a front-page editorial published by China Securities Journal.

The Shanghai Composite has fallen 5.3 percent this year and trades at 8.5 times projected profits for the next 12 months, lower than the seven-year average of 15.4, according to data compiled by Bloomberg. Trading volumes in the index were 44 percent below the 30-day average for this time of day.

Oaktree Capital Group LLC (OAK), the world’s largest distressed-debt investor, is buying Chinese stocks after valuations tumbled, Chairman Howard Marks said.

Share Sales

The nation’s equities are “tremendous bargains,” Marks said at a media briefing in Shanghai today, declining to name the specific shares he’s purchasing. While China’s economy faces risks from being weaned off stimulus, a burgeoning middle class and government plans for urbanization will bolster the country’s long-term potential, Marks said.

HSBC Holdings Plc and Markit Economics will release a services PMI for October tomorrow. Their index fell to 52.4 in September from 52.8 in August. A number more than 50 indicates an expansion.

China may lift a 12-month ban on new share sales this year following the party summit, according to the nation’s largest brokerage by market value.

“We still have reasons to believe that the IPOs may resume before the end of this year, as the policy meeting ends Nov. 12,” Boming Cheng, president of Citic Securities Inc., said in an interview in New York, where he was attending the Chinese Finance Association’s annual conference.

The Bloomberg China-US Index of the most traded Chinese stocks in the U.S. gained 0.5 percent on Nov. 1. Qunar Cayman Islands Ltd. and 58.Com Inc. jumped in New York after selling shares above their price targets, a signal that appetite for Chinese companies remains unshaken by Muddy Waters LLC’s fraud allegations against NQ Mobile Inc.

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

To contact the editors responsible for this story: Allen Wan at awan3@bloomberg.net; Michael Patterson at mpatterson10@bloomberg.net

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