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China Stocks Climb to Six-Month High; Consumer Companies Gain

China’s stocks gained, driving the benchmark index above the 3,000 level for the first time since April, as technology and consumer companies rose on speculation the industries will gain from the country’s next five-year plan.

Tsinghua Tongfang Co., a computer manufacturer, jumped by the 10 percent daily limit and Sanan Optoelectronics Co. gained 4.7 percent after the government said information technology will form a bigger part of the economy. Gree Electric Appliances Inc. and SAIC Motor Corp. paced gains by companies reliant on consumer spending after the ruling party pledged to increase household incomes as part of the next economic plan.

“China is shifting from a labor-intensive economic model to more higher-valued industries,” said Mark Tan, a Singapore- based portfolio manager at UOB Asset Management Ltd., which oversees about $12 billion. “The five-year plan is a road map to where we can expect higher growth.”

The Shanghai Composite Index rose 1.6 percent to 3,000.85, the first time it closed above that level since April 21 and the highest since April 21. The CSI Smallcap 500 Index, which tracks smaller companies on the Shanghai and Shenzhen bourses, jumped 3.1 percent, the most since May 24. The CSI 300 Index added 2.1 percent to 3,375.67.

The Shanghai Composite, which has rebounded 27 percent since the 2010 low on July 5, entered a so-called bull market on Oct. 12. The index plunged a similar amount in the first half of the year as the government raised banks’ reserve requirements and curbed lending to cool the economy and avert asset bubbles.

Chinese stocks were raised to “neutral” from “underweight” by JPMorgan Chase & Co. and Citigroup Inc. on the view the market remains a laggard even after posting Asia’s best gains this month. The Shanghai Composite has rallied 13 percent in October, trimming its losses for the year to 8.4 percent. The MSCI Emerging Markets Index and MSCI Asia excluding Japan Index have climbed more than 11 percent in 2010.

Five-Year Plan

The Communist Party central committee pledged yesterday to boost household incomes in rural and urban areas as part of the nation’s next five-year plan. China is also aiming for strategic emerging industries, which include information technology and high-end equipment manufacturers, to contribute around 8 percent of its GDP by the year 2015 and 15 percent by 2010, the government said on its website yesterday.

A gauge of technology stocks jumped 4.7 percent, while consumer discretionary stocks rose 4.1 percent, the two biggest gains among the 10 industry groups in the CSI 300. Tsinghua Tongfang gained 10 percent to 25.38 yuan. Aisino Co., a telecommunication equipment maker, added 6.4 percent to 20.17.

Chinese technology and software companies were rated “overweight” in new coverage at CCBI Securities Ltd., which said the government’s “macro stimulus” will boost technology spending in coming years.

Consumer Stocks

Gree Electric, a household appliance maker, led gains for consumer stocks, gaining 3.8 percent to 17.02 yuan. GD Midea climbed 2.7 percent to 17.16 yuan. SAIC Motor, China’s largest automaker, jumped 10 percent to 20.64 yuan.

A gauge of consumer discretionary stocks surged 4.1 percent for the second-steepest gain among the groups in the CSI 300. Chinese consumer-related companies will benefit most from the next plan, Jing Ulrich, JPMorgan Chase & Co. chairwoman of equities and commodities, said last month.

China’s large-cap stocks will lead a rally in the country’s equities as investors switch from smaller companies that trade at higher valuations, according to Bosera Asset Management Co.

“The divergence in performance between large- and small-cap stocks will increase,” said Deng Xiaofeng, a fund manager at Bosera Asset, China’s third-largest money manager with $31 billion in assets according to Institutional Investor. “Every dip is a good opportunity to buy low-valuation large-cap stocks.”

Fund Flows

Cash is pouring into China to profit from economic growth that’s averaged more than 10 percent for the past five years an faster yuan gains following the end in June of a two-year peg.

Emerging-market equity funds have attracted more than $60 billion of net inflows this year as central banks in the Europe and Japan stepped up efforts to reduce borrowing costs, spurring demand for higher-yielding assets, according to research firm EPFR Global.

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