China’s Stocks Rebound After Reaching Cheapest Levels

China’s stocks rose for the first time in five days, led by energy and consumer companies, after the benchmark index reached the cheapest levels on record.

China Petroleum & Chemical Corp. (600028), the refiner also known as Sinopec, gained 2.5 percent. FAW Car Co. (000800) jumped 5.1 percent after the Xinhua News Agency cited the People’s Liberation Army as saying the military must buy domestic-brand vehicles. Great Wall Motor Co., the nation’s biggest maker of sport utility vehicles, slid after it delayed the introduction of a model.

The Shanghai Composite Index rose 0.9 percent to 2,026.84 at the close, rebounding from its lowest level since July 31. The index has slumped 4.2 percent in 2014 amid concern the resumption of initial public offerings will divert funds. It traded at 10.1 times reported earnings yesterday, the cheapest going back to at least 2007 based on Bloomberg data, after trailing global markets for four straight years.

“With the market approaching the 2,000 level, some investors are bottom-fishing,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co. “Concern over IPO sales is still the biggest factor that is weighing on the sentiment as some of these companies are selling at very high prices.”

The Shanghai index’s 14-day relative strength measure, measuring how rapidly prices have advanced or dropped during a specified time period, was at 26.2 yesterday. Readings below 30 indicate it may be poised to rise. Trading volumes were 21 percent below the 30-day average today, according to data compiled by Bloomberg.

Economic Outlook

The ChiNext small-company index rose 2.8 percent, extending this year’s gain to 7.4 percent. The CSI 300 Index added 0.9 percent to 2,206.70. The Hang Seng China Enterprises Index (HSCEI) lost 0.2 percent.

The statistics bureau is scheduled to release data for fourth-quarter economic growth on Jan. 20. Growth probably decelerated to 7.6 percent from 7.8 percent in the previous quarter, according to a Bloomberg survey.

China’s economy will expand by 8.6 percent this year, supported by reduced overcapacity, deregulation in key sectors, rebounding external demand and a fiscal policy that includes higher government spending on infrastructure, Ma Jun, Deutsche Bank AG’s China economist, said in a press release.

Sinopec, Asia’s biggest oil refiner, gained 2.5 percent to 4.59 yuan. Citic Securities Co. (600030), China’s biggest listed brokerage, rose 1.4 percent to 11.58 yuan.

The People’s Bank of China will release data on aggregate financing and new loans for December this week. Money supply growth may have slowed to 13.9 percent from 14.2 percent in November, according to the median estimate of 38 economists in a Bloomberg survey.

IPO Postponement

China approved about 50 companies to sell stock following new rules in November aimed at strengthening investor protection and stamping out price manipulation. No IPOs have been approved since the end of last week.

High IPO prices and other problems shouldn’t derail market-oriented reforms after a more than one-year freeze, according to a front-page editorial in the China Securities Journal. Some people are concerned whether IPO reforms can succeed, it said.

The Shanghai Securities News reported yesterday that five companies have “adjusted” their timetable for new share offerings. This comes after Jiangsu Aosaikang Pharmaceutical Co. postponed its 4.05 billion yuan ($669 million) IPO last week, which would have been the biggest on China’s market for startups, after pricing the deal 21 percent higher than the industry average.

Automakers Gain

A measure of consumer-discretionary stocks climbed 2.6 percent, the most among the CSI 300’s 10 industry groups. FAW Car, which makes cars with Volkswagen AG, rose 5.1 percent to 10.35 yuan. Anhui Jianghuai Automobile Co., a unit of the biggest light-truck exporter, added 4.2 percent to 7.90 yuan.

China’s military will stop buying foreign vehicles as part of a campaign to promote frugality and reduce waste, Xinhua reported. The measures were approved by President Xi Jinping and the central military commission, the report said.

Great Wall Motor sank 0.6 percent to 38.70 yuan. The automaker said it delayed the introduction of its Haval H8 model for three months to address technical deficiencies.

The Bloomberg China-US Equity Index, the measure of the most-traded U.S.-listed Chinese companies, fell 1.7 percent in New York yesterday.

--Zhang Shidong. Editors: Allen Wan, Phani Varahabhotla

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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