Shanghai Composite Rises for Monthly Gain as Developers Rebound

China’s stocks rose before next week’s meeting of the National People’s Congress as property shares halted a six-day slide and consumer shares rallied. The benchmark index posted its first monthly advance since November.

Kweichow Moutai Co. surged 3.5 percent to spearhead a rally for liquor companies. Founder Securities Co. jumped 10 percent. China Vanke Co. led gains for developers after UBS Wealth Management and Templeton Emerging Markets Group said they were positive on property stocks. Industrial & Commercial Bank of China Ltd. slid 0.6 percent. The yuan plunged as much as 0.85 percent to 6.1808 per dollar, the biggest intra-day decline in China Foreign Exchange Trade System prices going back to 2007.

The Shanghai Composite Index (SHCOMP) rose 0.4 percent to 2,056.30 at the close, erasing a loss of as much as 1.3 percent and extending this month’s gain to 1.1 percent. The measure slumped 2.7 percent this week amid concerns the economy will slow as banks curb lending to the real-estate market and a weaker yuan spurs capital outflows.

“There was a rebound in the afternoon as this week’s declines were massive,” said Zhang Haidong, analyst at Tebon Securities Co. in Shanghai. “Yuan depreciation may cause concern that there will be reduced hot money, but the central bank is probably just targeting speculative investors. There’s still strong support at 2,000.”

The CSI 300 added 1.2 percent to 2,178.97. The Hang Seng China Enterprises Index (HSCEI) slid 0.6 percent. The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. advanced 2.2 percent yesterday.

NPC Meeting

Chinese data due tomorrow may show manufacturing fell to a 17-month low, according to economists surveyed by Bloomberg. A private index due next week is projected to show factory output slid a second month.

Policy makers will meet at the NPC in Beijing on March 3. Among policies likely to be discussed are those covering state-owned enterprises, financial industry deregulation, environmental protection, free-trade zones and pension rules, Barclays Plc analysts led by May Yan wrote in a Feb. 25 note.

The Shanghai Property Index gained 1.2 percent, snapping a six-day 10-percent slide. China Vanke, the largest developer, increased 2 percent to 6.72 yuan, the most since Jan. 24. Gemdale Corp. advanced 1.2 percent to 6 yuan.

The recent rout in China developers that sent valuations to record lows is spurring UBS Wealth Management and Templeton Emerging Markets Group to say it’s time to buy.

While some investors are concerned profit growth at developers will slow as banks curtail lending, UBS Wealth’s Kelvin Tay says tighter credit will encourage more disciplined spending and prove beneficial for the industry. Templeton is buying real-estate companies with lower debt levels and projects in larger cities such as Shanghai, where house prices climbed 18 percent last month from a year earlier.

Yuan Depreciation

Founder Securities surged 10 percent to 5.71 yuan. The company’s acquisition of China Minzu Securities Co. provides “great long-term growth prospects,” said Northeast Securities Co. analyst Yayun Tang, who has a buy rating on the company.

Kweichow Moutai led gains for consumer-staples producers, surging 3.5 percent to 150.02 yuan. Bright Dairy & Food Co. rose 4.4 percent to 17.63 yuan.

The Chinese currency tumbled by the most on record on speculation the central bank will widen the currency’s trading band, allowing greater volatility at a time when growth is slowing in the world’s second-largest economy.

UBS Strategy

The yuan’s drop was the biggest since China unified official and market exchange rates at the start of 1994, Bloomberg data show.

Goldman Sachs Group Inc. said a combination of macroeconomic and currency reform objectives are behind the yuan’s sudden drop, according to a report published yesterday by analysts including Kamakshya Trivedi. There are growing concerns over the growth impact of a credit buildup in the last few years, the report said. Policy makers also want to discourage leveraged bets on yuan appreciation, especially by local companies, it said.

ICBC, the nation’s biggest lender, lost 0.6 percent to 3.34 yuan, while rival China Construction Bank Corp. declined 0.8 percent to 3.86 yuan.

UBS AG plans to start trading Chinese stock-index futures after turnover more than tripled in the past two years amid growing investor demand for ways to hedge against equity losses.

The Swiss bank will probably offer contracts on the CSI 300 Index by next year after acquiring a Chinese commodities-futures brokerage this month, said Yang Xia, the head of China equities at UBS. Trading of the securities climbed more than 250 percent over the last two years as the CSI 300 slumped, data compiled by Bloomberg show. The index has fallen 6.5 percent this year, extending its losses since the end of 2009 to 39 percent.

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

To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Allen Wan, Richard Frost

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