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China Stocks Gain Most in 2 Weeks on Industrial Company Earnings

July 27 (Bloomberg) -- China stocks rose, sending the benchmark to its biggest gain in two weeks, after data showing industrial company profits advanced eased concerns that government measures to curb inflation will hurt earnings growth.

China Shipbuilding Industry Co. jumped the most in a month, leading gains among industrial companies. Zijin Mining Group Co. rose after gold futures climbed to a record as investors sought a haven from a possible U.S. debt default.

The Shanghai Composite Index added 20.45 points, or 0.8 percent, to 2,723.49 at the 3 p.m. close, the most since July 13. The gauge has risen 1.3 percent from a one-month low two days ago following a fatal train crash on July 23. The CSI 300 Index gained 0.8 percent to 3,000.05.

“The market had been over-pessimistic about the aftermath of the train crash,” said Wu Kan, a fund manager at Dazhong Insurance Co., which oversees $285 million. “That would lead to some recovery in valuation for the short term, given the accident isn’t changing anything fundamental in the economy.”

Stocks rebounded in the morning session after the statistics bureau reported net income at industrial companies climbed 28.7 percent in the first six months from a year earlier, compared with a 27.9 percent gain in January through May. The International Monetary Fund forecast on June 17 China’s economy will grow 9.6 percent this year, the fastest pace among the world’s major emerging markets.

Faster Inflation

The Shanghai Composite has slumped 3 percent this year as the People’s Bank of China raised interest rates three times and ordered lenders to set aside more cash as deposit reserves six times to contain inflation, which has quickened to the fastest pace in three years.

China’s central bank probably won’t increase the reserve requirement ratio for banks this month or in August, as cashflows from abroad and money supply slowed, China Securities Journal said today in a commentary.

China Shipbuilding climbed 3.9 percent to 13.71 yuan, the biggest advance since June 27. Beijing New Building Materials Public Ltd. paced gains by construction-material makers, rising 4.3 percent to 15.99 yuan.

China may meet a target of starting work on 10 million affordable housing units by November, Xinhua News Agency reported yesterday, citing Vice Housing Minister Qi Ji. Construction had started on more than half of the homes by the end of June, the report cited Qi as saying.

Anhui Conch Cement Co., the nation’s largest building-materials producer, rose 1.2 percent to 26.19 yuan. Huaxin Cement Co. added 1.2 percent to 26.38 yuan.

Gold Producers

A gauge tracking material makers in the CSI 300 Index increased the most among 10 groups, rising 1.9 percent. Zijin Mining, China’s biggest gold producer, increased 3.6 percent to 5.70 yuan, the largest rise since July 14. Shandong Gold Mining Co. gained 1 percent to 49.84 yuan.

Spot bullion rose as much as 0.4 percent to a record $1,625.70 an ounce and traded at $1,623.23 at 3:39 p.m. in Singapore.

A gauge tracking consumer staples in the CSI 300 Index climbed 1.2 percent. Tsingtao Brewery Co., China’s biggest brewer by market value, advanced 5.1 percent to 38.46 yuan. Wuliangye Yibin Co. added 1.6 percent to 38.40 yuan.

Monthly maturing central-bank bills will average 227 billion yuan ($35 billion) in the second half of the year, compared with an average of more than 600 billion yuan in the first half, reducing pressure on the central bank to absorb cash from the financial system, the China Securities Journal reported.

China has limited room to increase reserve requirement ratios as fewer central-bank bills will mature in the second half, the Financial News said today, citing experts it didn’t identify. China may raise interest rates at least once by the end of the year and the increase may be “small,” the newspaper said.

To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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