China’s Stocks Rise After Valuations Drop to Lowest Since August

China’s stocks rose, led by health-care and consumer-related companies, after the benchmark index’s valuations plunged to the lowest level since August.

Shanghai Fosun Pharmaceutical Group Co. led gains for health-care companies, surging 6.2 percent for a 17 percent advance this week. Sichuan Changhong Electric Co. jumped 7 percent. Anhui Huilong Agricultural Means of Production Co. surged 4.1 percent after the Xinhua News Agency said Anhui province plans to allow farmers to sell their land. Shanghai Pudong Development Bank Co. (600000) paced losses for financial shares.

The Shanghai Composite (SHCOMP) added 0.6 percent to 2,100.51 at the close. The index trades at 8.3 times projected profit for the next 12 months, the lowest since Aug. 23, according to data compiled by Bloomberg. It dropped 1.8 percent yesterday, the most in seven weeks, after a top-level Communist Party meeting disappointed investors looking for details on policy shifts.

“Investors had excessively high expectations but there were no detailed measures about reform measures after the meeting,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co., which oversees $120 million. “Some of the declines reflected investors’ disappointment and the market is poised for a rebound.”

The CSI 300 Index rose 0.7 percent to 2,304.50. The Hang Seng China Enterprises Index (HSCEI) climbed 1.1 percent. The Bloomberg China-US Equity Index added 0.6 percent in New York yesterday.

Trading volumes in the Shanghai Composite were 28 percent lower than the 30-day average today, while 10-day volatility rose to a one-week high, according to data compiled by Bloomberg. The index has dropped 14 percent from this year’s high set on Feb. 6 amid concern economic growth will slow in the fourth quarter.

Land Reform

A gauge of health-care stocks in the CSI 300 jumped 1.7 percent today. Shanghai Fosun Pharmaceutical gained 6.2 percent to 18.53 yuan. Sichuan Kelun Pharmaceutical Co. added 2.7 percent to 42.76 yuan.

Shandong Weigao Group Medical Polymer Co. surged 31 percent in Hong Kong trading after reporting third-quarter profit gained 28 percent and spurring analysts including Credit Suisse Group AG to recommend buying the shares.

A sub-index of consumer-discretionary shares rose 2.1 percent, the second-biggest gain among the 10 industry groups. Sichuan Changhong jumped 7 percent to 3.04 yuan. Hisense Electric Co. (600060), China’s biggest manufacturer of flat-panel televisions, added 1.3 percent to 11.60 yuan.

Tighter Liquidity

Anhui province plans to allow farmers to buy and sell land previously specified for home construction under a trial program in 20 counties, Xinhua reported yesterday. Ownership certificates will be issued by the end of 2015 for collectively owned rural land for use in construction, agriculture and other purposes, Xinhua said, citing guidelines issued by the local government. Anhui Huilong jumped 4.1 percent to 10.99 yuan, extending yesterday’s 7.2 percent gain.

The meeting of China’s top decision makers ended with a promise to allow the market to play a decisive role in the allocation of resources. Topics seen as crucial to reform, ranging from financial market liberalization to strengthening farmers’ land rights and allowing rural migrants to settle in cities, were touched on only briefly.

The National Development and Reform Commission will issue key reform plans at a proper time, according to a statement posted on the commission’s website, which cited chairman Xu Shaoshi as saying yesterday. The State Council said it will continue pushing forward resource pricing reform and improving the air pollution situation, Xinhua reported, citing the central government’s website yesterday.

A measure tracking financial stocks slid 0.3 percent, the only loss among the 10 industry groups. Pudong Bank fell 1.6 percent to 9.49 yuan. Industrial Bank Co. (601166), part-owned by a unit of HSBC Holdings Plc, lost 2.5 percent to 10.64 yuan.

China’s stocks will be held back in the short term as investors weigh the strength of the economy and liquidity concerns intensify, Citic Securities Co., the nation’s biggest listed brokerage, said in a report today. The seven-day repurchase rate, a gauge of funding availability, climbed 26 basis points to 4 percent, the most since Oct. 30.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.