China’s stocks rallied the most this month as health-care and consumer-related companies gained on the prospect they will benefit from uncertainty over government measures to cool asset bubbles.
Guangzhou Pharmaceutical Co. added 4.5 percent and retailer Dashang Group Co. jumped the 10 percent daily limit. Huaneng Power International Inc. led gains for power suppliers after reporting higher profit. Gemdale Corp., the country’s fourth-largest developer by market value, paced a rebound by property stocks after investor Mark Mobius said China’s demand for housing will withstand government bank lending curbs.
“Small and medium cap stocks like drugmakers and retailers are the best place to shield from policy risks,” said Zheng Tuo, president of Shanghai Good Hope Equity Investment Management Co. “The impact of the crackdown on the property market won’t be catastrophic because the government may ease off if there’s a big decline in property prices.”
The Shanghai Composite Index rose 53.75, or 1.8 percent, to close at 3,033.28, the biggest advance since March 29 and snapping a four-day, 5.9 percent decline. The CSI 300 Index gained 2 percent to 3,236.68. Futures on the CSI 300 expiring in May, the most active contract, added 1.6 percent to 3,267.2.
The Shanghai index has dropped 7.4 percent this year, the world’s fourth-worst performer, on concern growth will slow after the government unwound monetary stimulus and announced measures to damp property prices.
“Investor sentiment toward the banking, property and building materials sectors has turned significantly negative, while consumption, health-care and new economy sectors are seen as potential beneficiaries of policy shifts,” Jing Ulrich, chairwoman of China equities and commodities, said in a report today.
Ulrich joins Shenyin & Wanguo Securities Co. and China International Capital Crop. in recommending buying consumer-related stocks and avoiding financial companies.
Guangzhou Pharmaceutical advanced 4.5 percent to 13.75 yuan and Tianjin Tasly Pharmaceutical Co. rose 2.8 percent to 29.55 yuan.
Among retailers, Yinchuan Xinhua Department Store Co. rose 10 percent after reporting a 60 percent gain in first-quarter profit. Dashang surged 10 percent to 48.99 yuan. Beijing Wangfujing Department Store (Group) Co. gained 5.1 percent to 36.64 yuan, the most since Sept. 21.
Measures tracking consumer-related stocks and utilities climbed at least 2.7 percent today, the biggest gainers among the CSI 300’s 10 industry groups.
Huaneng Power, the listed unit of China’s largest power group, gained 3 percent to 7.14 yuan after posting a 41 percent increase in first-quarter profit to 952.8 million yuan on higher demand.
Datang International Power Generation Co., a unit of China’s second-biggest electricity producer, surged 10 percent to 8.68 yuan. The company won approval to sell shares of its alternative energy and coal-to-chemical businesses on the nation’s startup board, the Wall Street Journal reported on its Chinese-language Web site, citing Vice Chairman Cao Jingshan.
Datang has no plan to list the unit on the Shenzhen board and no approval has been given for any share sale, it said in a statement to the Hong Kong stock exchange during afternoon trading.
The Se Shang Property Index rebounded 1.6 percent, the biggest gain in three weeks. The gauge has lost 7.3 percent this week after the government limited loans for third-home purchases, increased down payment requirements and raised mortgage rates. It now trades at 19.9 times reported earnings, near the lowest since February 2009, according to data compiled by Bloomberg.
“We don’t see fundamentals of the property industry will change much because of these new policies,” Templeton Asset Management Ltd.’s Mobius said. Further declines in the nation’s property stocks may be an opportunity to buy the shares, he said.
Gemdale added 2.6 percent to 11.51 yuan, rebounding from its lowest level since May 2009. China Vanke Co., the nation’s biggest listed property developer, rose 1 percent to 8.11 yuan, its first gain in six days.
Martin Currie’s Chris Ruffle said in an interview this week Chinese real estate stocks are becoming “more attractive” as government measures drove valuations to a year-low and made interest rate increases less likely. China Asset Management Co., the nation’s biggest mutual fund company, bought developers in its flagship fund in the first quarter, predicting “gentle” tightening this year, according to the company’s Web site.
Marc Faber, the publisher of the Gloom, Boom & Doom report, said today surging real estate prices and China’s “excessive” credit expansion are “danger signals” that growth is peaking.
China’s economy expanded 11.9 percent in the first quarter, the most in almost three years, fanning concern that record lending is creating asset bubbles.
The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.
Insurance companies: The combined first-quarter profit of China’s insurers may have risen 110 percent from a year earlier to 18 billion yuan, Wu Dingfu, Chairman of the China Insurance Regulatory Commission, said in a statement posted to the regulator’s Web site.
Ping An Insurance (Group) Co. (601318 CH), China’s second-biggest insurer, added 2.8 percent to 52.02 yuan. China Pacific Insurance (Group) Co. (601601 CH), the third largest, rose 3.5 percent to 27.30 yuan.
Henan Shen Huo Coal Industry & Electricity Power Co. (000933 CH) advanced 4.7 percent to 33.50 yuan after the company said it expects first-half net income to gain as much as 250 percent on year because increased production and prices of coal and aluminum.
Panda Fireworks Group Co. (600599 CH) rose 1.5 percent to 21.44 yuan, the highest in two months, after agreeing to buy 51 percent of Liuyang Dancing Fireworks Group for 62.7 million yuan.