China’s Stocks Rise to One-Month High as Coal Producers Advance

China’s stocks rose, sending the benchmark index to a one-month high, as Anhui Conch Cement Co. led a rally for material companies and the government signaled measures to reduce coal supply that may boost industry prices.

China Shenhua Energy Co. (601088) and Yanzhou Coal Mining Co. climbed at least 1.6 percent after the State Council said the nation will curb “disorderly” coal output growth. Bright Dairy & Food Co., a Shanghai-based dairy maker, jumped 6.5 percent after its state-owned parent replaced its chairman. Anhui Conch Cement surged to a six-month high after BNP Paribas SA named it a top pick and beneficiary from government reforms.

The Shanghai Composite Index (SHCOMP) rose for a second day, adding 0.8 percent to 2,219.37 at the close, the highest since Oct. 21. JPMorgan Chase & Co. said Chinese industrial profits posted “a solid growth pace” after rising 15.1 percent in October.

“Good prospects for reform and the stable economic environment are factors that have prompted investors to buy stocks,” said Wu Kan, a money manager at Dragon Life, which oversees about $3.3 billion. “The gain for coal stocks is event driven.”

The CSI 300 Index rose 1 percent to 2,439.53. The Hang Seng China Enterprises Index (HSCEI) gained 0.2 percent. The Bloomberg China-US Equity Index added 1.1 percent yesterday.

Trading volumes in the Shanghai measure were 23 percent higher than the 30-day average today, according to data compiled by Bloomberg. The index has risen 3.6 percent this month and trades at 8.7 times projected profit for the next 12 months, compared with the seven-year average of 15.3, according to data compiled by Bloomberg.

Coal Shares

Gauges of material, energy and consumer-staples stocks in the CSI 300 rose at least 1.5 percent, the biggest gainers among the 10 industry groups.

Shenhua, the largest coal producer, gained 1.6 percent to 17.06 yuan. Yanzhou Coal climbed 3 percent to 10.42 yuan. Datong Coal Industry Co. (601001) rose 0.5 percent to 6.31 yuan.

China will curb disorderly coal output growth and encourage high-quality coal imports, according to a State Council statement posted on the website of the China Coal Industry Association yesterday.

Anhui Conch surged 6.3 percent to 17.99 yuan, the highest close since May 8. Huaxin Cement Co. (600801), a Holcim Ltd. affiliate, added 4.9 percent to 12.58 yuan. Tangshan Jidong Cement Co. gained 5.1 percent to 9.33 yuan. The materials gauge has fallen 24 percent this year, the worst performer after the energy measure.

Industrial Profits

“The China materials sector is the second most underweighted sector after China banks in GEM and Asia ex-Japan portfolios,” Rachel Cheung, an analyst BNP Paribas SA, wrote in a report dated yesterday. “We prefer companies with the most demand exposure to east and south China in 2014. Anhui Conch remains our top pick on the back of China’s new reform measures and the company’s favorable market exposure.”

Industrial profits in China, a measure of the change in profitability of the largest companies in 41 industries, increased 13.7 percent in the first 10 months from a year earlier, compared with 13.5 percent in the first nine months, according to the National Bureau of Statistics. Profits grew 18.4 percent in September.

“Looking ahead, further recovery in industrial activity and external demand, as well as gradual pricing recovery, will likely support industrial profits,” Zhu Haibin, chief China economist at JPMorgan in Hong Kong, wrote in a report.

IPO Outlook

Bright Dairy gained 6.5 percent to 22.79 yuan. Parent Bright Food Group named Lv Yongjie as chairman of the company, replacing Wang Zongnan, who stepped down due to health reasons, according to a statement. Bright Dairy said yesterday it would raise prices for some milk and yogurt products by 8 percent and 9 percent from Dec. 1.

“State-owned enterprise reform will be a big investment theme and Shanghai-based companies are spearheading the campaign,” said Wu of Dragon Life.

Inner Mongolia Yili Industrial Group Co., China’s biggest dairy producer by sales, advanced 2.9 percent to 40.51 yuan.

China CNR Corp. (601299), the nation’s second-biggest train maker, gained 1.6 percent to 5.70 yuan after the company said it’s in advanced talks with countries including Romania and Russia to export high-speed trains.

China may resume initial public offerings within this year, the Guangzhou Daily reported, citing Lan Banghua, an official at the Shenzhen Stock Exchange.

There are 761 applications for IPOs on the Shanghai, Shenzhen and the ChiNext boards and 670 are awaiting reviews as of Nov. 21, according to the report.

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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