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China Stocks Rise Most in 3 Weeks on U.S. Goods Orders, Earnings

China’s stocks climbed the most in three weeks as a rebound in demand for U.S. capital goods eased concern the global recovery is faltering and profits for Chinese industrial companies surged during the first eight months.

Jiangxi Copper Co. and Aluminum Corp. of China Ltd. rose at least 2.8 percent after orders for U.S. capital equipment exceeded economists’ estimates. Zhongjin Gold Corp., the country’s second-largest producer of the precious metal, gained the most in seven weeks on the prospect accelerating inflation will boost demand for bullion as a safe haven. Dongfang Electric Corp. rallied the 10 percent daily cap as industrial profits rebounded 55 percent after sliding last year.

“The good overseas data will strengthen investors’ expectations about stable exports this year,” said Wang Zheng, chief investment officer at Jingxi Investment Management Co. in Shanghai. “There isn’t a big risk of decline for stocks now as concerns about a hard landing are receding.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, advanced 36.42, or 1.4 percent, to 2,627.97 at the 3 p.m. close, the most since Sept. 6. The CSI 300 Index added 1.7 percent to 2,905.03. China’s markets were closed from Sept. 22 to Sept. 24 for the Mid-Autumn Festival. They will be shut again from Oct. 1 to Oct. 7 for National Day.

The Shanghai index has lost 20 percent this year as the government imposed tightening measures ranging from restrictions on multi-house purchases to a 7.5 trillion yuan ($1.1 trillion) annual limit on new lending by banks. The gauge has climbed 11 percent from this year’s low on July 5 on signs the nation’s economic slowdown is stabilizing.

U.S. Orders

A gauge of China’s material producers advanced 3.4 percent for the biggest gain among the 10 industry groups in the CSI 300. Jiangxi Copper, China’s biggest producer of the metal, added 5.2 percent to 31.02 yuan. Aluminum Corp. of China Ltd., the listed unit of nation’s biggest maker of the lightweight metal and also called Chalco, rose 2.8 percent to 9.89 yuan.

Orders for U.S. capital equipment rebounded 4.1 percent in August from a 5.3 percent decline in July, figures from the Commerce Department showed on Sept. 24 in Washington. The median forecast of 11 economists surveyed by Bloomberg was for an increase of 3 percent.

“China’s export growth will still probably be pretty fast this year as overseas demand isn’t supposed to a big drag on the economy,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “The risk appetite for stocks will come back.”

A gauge of industrial companies rose 2.1 percent today. Dongfang Electric, China’s second-biggest maker of power equipment, rallied the maximum 10 percent to 31.39 yuan for the steepest gain among industrial companies. China First Heavy Industries Co., a maker of equipment used in the mining and energy industries, added 1.8 percent to 5.24 yuan.

Profits Rebound

Chinese industrial companies’ profits climbed 55 percent in the first eight months of 2010 from a year earlier, bolstering investment as the government pares back stimulus. Net income increased to 2.6 trillion yuan, the statistics bureau said today in an e-mail. That compared with an 11 percent decline in the same period in 2009.

The figures, released every three months, cover state and private businesses with annual sales of more than 5 million yuan in 39 industries, including steel, chemicals, electricity, telecommunications and mining.

Zhongjin Gold led gains for bullion producers, advancing 4.3 percent to 36.04 yuan, the most since Aug. 9. Shandong Gold Mining Co., China’s third-largest bullion producer, gained 5 percent to 46.88 yuan.

Inflation Outlook

Gold may rise to $1,315 an ounce by year-end, advancing 1.3 percent from $1,298.10 on Sept. 24, heading for a ninth straight quarter of gains and the longest rally since at least 1975, according to the median of 24 analyst estimates in a Bloomberg survey. The benchmark index for commodities is signaling neither inflation nor deflation, spurring investors to bet the best returns next quarter will be in precious metals.

Wang Jian, secretary general of the China Society of Macroeconomics, said the nation will have a “difficult” time achieving its target of 3 percent inflation this year, with the country’s consumer price index possibly growing about 5 percent in October, China Business reported yesterday on its website.

China’s real inflation rate may rise to “double digits” over the next 12 months, Andy Xie, former Morgan Stanley economist, said in an interview at Bloomberg’s office in Shanghai Sept. 17. The August inflation rate was 3.5 percent.

A gauge of property stocks in the Shanghai Composite erased earlier losses, rising 1.5 percent.

Property Bears

China may start a trial of property tax in some cities in 2011, the Economic Observer newspaper reported over the weekend, citing unidentified officials at the Beijing tax bureau. The program may be announced at the end of this year at the earliest, the official said. The cities of Shenzhen and Hangzhou could be among the first to try out the system, it said.

The housing ministry and banking regulator are jointly probing the way commercial lenders implement second-home policy curbs in major cities, the China Business Journal reported on Sept. 25, citing an unidentified official at the housing ministry. The investigation, which was started in the middle of this month, will report its results after the holidays for policy makers to decide if policy changes are needed, it said.

China has entered a property bear market that will last for five years, with the average prices in larger cities likely to decline by half or more, Xie wrote in a commentary for Bloomberg News.

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