China Stocks Rise as Technology Rally Overshadows Property Data

Aug. 18 (Bloomberg) -- Bloomberg’s John Dawson breaks down data on new-home prices in China as lower demand and government restrictions prompted prices to fall in 64 or 70 cities measured. He speaks on “Asia Edge.”

China’s stocks rose to an eight-month high as gains by shipping and technology companies offset data showing a deepening slump in the nation’s housing market.

China Shipping Container Lines Co. jumped 6.2 percent after a gauge of shipping costs surged 31 percent last week. Shanghai Wangsu Science & Technology Co. rallied 3.8 percent to help the ChiNext index post its steepest gain in five months. China Vanke Co. and Poly Real Estate Group Co., the biggest Chinese developers, slipped after data today showed new-home prices fell in July in almost all cities that the government tracks.

The Shanghai Composite Index (SHCOMP) rose 0.6 percent to close at 2,239.47, the highest level since Dec. 5. Recent data including weaker-than-estimated credit growth and industrial production have boosted speculation the government will ease monetary policy. Official data showed new home prices fell in July in 64 out of 70 cities, compared with 55 cities in June, while foreign-direct investment plunged 17 percent.

“The weak property data led to optimism that there will be more policy loosening,” said Mao Sheng, an analyst for Huaxi Securities Co. “Also, there are hopes that there will be rate cuts soon as that would reduce the cost of lending. We are likely going to continue this rally in the short term as investors have more confidence in the market.”

The CSI 300 Index rose 0.6 percent to 2,374.56. The Hang Seng China Enterprises Index (HSCEI), or H-shares gauge, retreated 0.5 percent at 3:32 p.m., dragged down by losses for Tsingtao Brewery Co. The Hang Seng China AH Premium Index jumped 0.9 percent for the biggest gain since July 31, signaling a narrowing gap between dual-listed stocks.

Bourses Link

The Shanghai Composite is valued at 8.9 times 12-month projected earnings, compared with a multiple of 7.2 for the H-shares gauge, according to data compiled by Bloomberg. The Shanghai index has risen 12 percent from this year’s low as monetary easing, accelerated government spending and gains in manufacturing spur speculation the nation will meet its 7.5 percent economic expansion target. Optimism that cross-border trading between Hong Kong and Shanghai will spur inflows has also boosted equities.

China Shipping Container, the country’s second-largest carrier of sea-cargo boxes, rose to its highest level since Dec. 4. China Shipping Development Co., a unit of the second-biggest sea-cargo group, gained 4.9 percent.

Shanghai’s container-shipping rates have increased for four months, fueled by a rebound in U.S. and European exports since the end of 2013, which is also aiding China’s economy, according to Tim Craighead, director of Asian Research for Bloomberg Intelligence. Rates plunged last year due to overcapacity and slowing global growth, he said.

Tsingtao Plunges

A measure of technology companies in the CSI 300 jumped 1.7 percent, the biggest gain among 10 industry groups. GoerTek Inc., a supplier to Apple Inc., climbed 2.6 percent. People.cn Co. (603000), the online business of the Chinese Communist Party’s official newspaper, jumped 10 percent. In the ChiNext, Wangsu Science gained 3.8 percent while Spreadhead Intergrated Marketing Communication Co. jumped 10 percent.

China International Capital Corp. said it expects further Chinese stock gains in the third quarter as the government announces more reforms of state-owned enterprises and the Shanghai-Hong Kong Connect lures funds into mainland shares.

Tsingtao Brewery slumped 1.7 percent, dragging down the H-shares gauge. Daiwa Securities Co. rated the shares underperform, saying the introduction of the bourses link may divert investors to A shares from H shares. The company’s sales volume growth and valuations are no longer supported by mergers as in the past five years because of fewer available targets, Daiwa analysts Anson Chan and Alison Law wrote in a note dated Aug. 15. The Shanghai-listed shares advanced 0.2 percent.

Rate Impact

Vanke, the biggest listed developer, slipped 0.2 percent while Poly Real Estate, the second largest, dropped 0.7 percent.

Home prices fell in 64 of the 70 cities last month from June, the National Bureau of Statistics said today, the most since January 2011 when the government changed the way it compiles the data. Beijing prices fell 1 percent from June, posting the first monthly decline since April 2012.

Chinese investors counting on interest-rate cuts to extend the nation’s stock-market rally may be setting themselves up for disappointment. China Merchants Bank Co. predicts policy makers may lower borrowing costs as early as next month, while Barclays Plc is forecasting two cuts by year-end.

The Shanghai Composite’s performance fell 8.7 percent from Sept. 15 to Nov. 26, 2008, even as the People’s Bank of China lowered borrowing costs four times amid the global financial crisis. The index slid 4 percent from June 7 to July 5, 2012, with the central bank cutting rates on both days, and a further 5.2 percent in the next three months.

While lower interest rates provide some support to the economy, the monetary authority tends to act only after the slowdown becomes deep enough to drag down share prices, said Hao Hong, a Hong Kong-based strategist at Bocom International Holdings Co.

To contact Bloomberg News staff for this story: Weiyi Lim in Singapore at wlim26@bloomberg.net; Zhang Shidong in Shanghai at szhang5@bloomberg.net

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

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.