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China’s Shares Advance on National Congress Speculation

China’s stocks rose, capping the benchmark index’s longest weekly winning streak since 2009, amid speculation the government may introduce policies to support economic growth at a national congress next week.

Hisense Electric Co. and Qingdao Haier Co. led an advance among home appliance makers, bolstered by optimism government stimulus will raise consumer demand. China Shenhua Energy Co., the country’s biggest coal producer, advanced the most in a week after saying it will buy stakes in companies from its parent. Air China Ltd., the largest international carrier, gained 1.4 percent after HSBC Holdings Plc recommended buying shares of airlines on the earnings outlook and valuations.

“Investors are hoping there’ll be more reforms that may boost the market,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “For instance, home appliances may benefit if they have policies to increase consumption. Better liquidity these days is also helping the market reach highs.”

The Shanghai Composite Index rose 34.6 points, or 1.4 percent, to 2,460.69 at the close, the highest since Nov. 17. The gauge added 0.9 percent this week, a seventh week of gains and the longest winning streak since July 2009. The CSI 300 Index advanced 1.8 percent to 2,679.93. The value of stock traded in Shanghai exceeded its 30-day average each day in February except for one, data compiled by Bloomberg show.

The Shanghai index advanced 5.9 percent last month, capping its biggest monthly gain since October 2010, on the prospect the central bank will add to a Feb. 18 cut in reserve requirements to halt a decline in economic growth. For the year, the measure has rebounded 12 percent and trades at 10.2 times estimated profit, compared with a record low of 8.9 times on Jan. 6, weekly data compiled by Bloomberg showed.

‘Cautious, Prudent’

The National People’s Congress, whose annual meeting will run for a week and a half, is legally the highest governmental body in China. Its members are some of China’s most powerful politicians and executives, wielding power in their home provinces and weighing in on proposals such as whether to impose a nationwide property tax.

“It is expected that the committee will continue to adopt cautious and prudent macroeconomic policy in order to ensure a soft landing and economic stability,” Alan Lam, an analyst at Bank Julius Baer & Co., which helps oversee about $304 billion worldwide, wrote in an e-mailed note today.

Barclays Plc said investors should buy Chinese consumer directionary stocks over consumer staples before the NPC as real wage inflation may help consumers spend more on discretionary products.

Hisense, China’s biggest maker of flat-panel televisions, surged 5.2 percent to a record 21.07 yuan. Qingdao Haier, China’s biggest refrigerator maker, jumped 5.4 percent to 11.57 yuan, the highest close since Aug. 25.

Property Controls

China Vanke Co., the nation’s largest listed property developer, advanced 4 percent to 8.63 yuan after the Economic Observer reported the company has set an “internal target” for 2012 home sales of more than 148 billion yuan ($23.5 billion). The company’s 2011 actual home sales were 121.5 billion yuan. Poly Real Estate Group Co., China’s second-largest developer, rose 4.4 percent to 11.63 yuan.

“Developers are having promotions and the bigger companies with price advantages will benefit from a rebound in sales,” Li Shaoming, an analyst at China Investment Securities Co., who described Vanke’s target as “optimistic,” said in a telephone interview from Shenzhen. “Investors are more keen on blue chips these days.”

Airlines Outlook

Shenhua Energy gained 1.1 percent to 27.81 yuan, after saying it will buy stakes in three companies and rail cars from parent Shenhua Group Corp. for 3.45 billion yuan. A gauge of energy shares in the CSI 300 climbed 1.9 percent, the third most of 10 industries. Brent oil for April settlement surged as much as 4.7 percent to $128.40 yesterday, the highest price since July 2008.

Air China increased 1.4 percent to 7.10 yuan. Investors should buy shares of China’s airlines as the companies have a “robust” earnings outlook for this year and are trading at or below book value, according to HSBC. The bank kept an “overweight” rating for Air China.

Hainan Airlines Co., backed by the government of China’s Hainan province, gained 2.2 percent to 5.21 yuan. The carrier may swap Boeing Co. 787 Dreamliner orders for larger 747-8s following delivery delays, said Chen Feng, the chairman of its parent.

Manufacturing Data

Chinese stocks traded in the U.S. rose, led by Seaspan Corp., after government data showed China’s manufacturing expanded for a third month. The Bloomberg China-US 55 Index of the most-traded Chinese stocks in the U.S. added 0.4 percent yesterday. Seaspan, a Hong Kong-based container ship operator, soared to a 10-month high as plans to boost a quarterly dividend and buy back shares spurred two analysts to reiterate “buy” recommendations.

China’s purchasing managers’ index rose to 51.0 last month, from 50.5 in January, government data released yesterday showed. Above the 50 level that is the threshold for expansion, the February reading was the highest since September and beat a 50.9 median estimate of economists surveyed by Bloomberg. The Bloomberg China-US 55 measure sunk 8.3 percent last year as Europe’s debt crisis and sluggish U.S. growth damped prospects for the world’s largest exporter, where the economy expanded at the slowest pace for 10 quarters at the end of 2011.

“The PMI was obviously encouraging and China is going to have a soft landing in decent growth,” Greg Lesko, who manages $700 million at Deltec Asset Management in New York including investments in Chinese stocks, said in a phone interview yesterday.

Monetary Policies

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., was little changed at $40.32 yesterday, after advancing 3.8 percent last month. The Standard & Poor’s 500 Index climbed 0.6 percent to 1,374.09, extending a three-month rally, after government data showed that U.S. jobless claims declined to a four-year low.

Chinese economic growth is expected to slow to about 8.5 percent this year, from 9.2 percent in 2011, China’s Ministry of Industry and Information Technology said on Feb. 29. Policy makers are already loosening monetary policy to ease access to credit for smaller businesses, cutting the amount of cash large banks need to keep in reserve for the second time since December on Feb. 24. Benchmark rates have been on hold since July.

“They are going to loosen more on the fiscal side than the monetary side because they still want to see housing prices stay,” Deltec Asset’s Lesko said.

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