China’s Stocks Advance, Capping Biggest Weekly Gain in Month

China’s stocks rose, capping the benchmark index’s biggest weekly rally in more than a month, as speculation grew that economic growth is rebounding.

Poly Real Estate Group Co. jumped for a fourth day, leading a gauge of property developers to the biggest advance since February, after China Business News reported sales volume in 54 Chinese cities rose in September and October. SAIC Motor Corp. rose to the highest in two weeks, pushing consumer discretionary stocks to the biggest gain among industry groups in the CSI 300 Index this week, after its third-quarter profit increased.

The Shanghai Composite Index climbed for a fourth day, adding 0.6 percent to 2,117.05 at the close. The index jumped 2.5 percent this week, the steepest five-day gain since the week ended Sept. 28. The Shanghai gauge rose 1.7 percent yesterday after a purchasing managers index indicated the manufacturing industry grew for the first time in three months in October.

“Investors think the economy may have reached a bottom, especially since the PMI showed positive signs,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “If there’s more data proving this, it would be good for stocks. Still, we need more liquidity for any gains to last.”

The CSI 300 Index added 0.4 percent to 2,306.77 today, while the Hang Seng China Enterprises Index in Hong Kong increased 1.4 percent, extending its climb from its Sept. 5 low to 20 percent. The Hang Seng China Premium index, which tracks the price discount of A-shares to H-shares, fell to the lowest since June last year.

Leadership Congress

The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. jumped 2.1 percent yesterday as U.S. data showed companies expanded payrolls in October by the most in eight months and the Institute for Supply Management’s U.S. factory index rose to a five-month high.

“We have seen an increasing amount of evidence for green shoots” in China, said Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong who this week raised his fourth-quarter forecast for economic growth to 7.8 percent from 7.5 percent.

A manufacturing gauge from HSBC Holdings Plc and Markit Economics posted the biggest gain since October 2010. Industrial companies’ profits recorded the first year-on-year gain in September since March, data showed Oct. 27.

Investors are focusing on the ruling communist party’s once-a-decade leadership transition that begins with a congress starting Nov. 8 in Beijing. Vice President Xi Jinping will probably become head of the party and he is likely to succeed Hu Jintao as president at the annual session of the nation’s legislature in March. Vice Premier Li Keqiang may succeed Wen Jiabao as premier.

Index Volatility

The Shanghai Composite lost 0.8 percent in October on concern earnings growth will decelerate. Some 948 of the index’s companies reported third-quarter profit with an average drop of 1.6 percent from a year earlier, data compiled by Bloomberg show.

The Shanghai index trades at 10 times estimated profit, compared with the 17.8 average multiple since Bloomberg began compiling the weekly data in 2006. Trading volumes of the gauge’s companies were 9.3 percent above the 30-day average for this time of day. Thirty-day volatility in the Shanghai gauge was at 16.6, lower than this year’s average of 17.2.

A gauge of property developers in the Shanghai Composite rose 1.8 percent today, adding to a weekly gain of 6.9 percent, the biggest five-day advance since the week ended Feb. 24. Poly Real Estate, the country’s second-largest developer, gained 1.6 percent to 11.79 yuan, extending this week’s advance to 10 percent. China Vanke Co., the largest developer, added 0.7 percent today for a five-day gain of 5.5 percent.

Property Outlook

Sales volume in 54 Chinese cities rose more than 51 percent in September and October, according to China Business News. China’s new home prices rose for a fifth month as sales picked up in a sign government curbs are helping stabilize the property market, SouFun Holdings Ltd., the country’s biggest real estate website owner, said in an e-mailed statement yesterday, based on its survey of 100 cities.

Zhejiang Shibao Co. shares were halted after jumping six-fold to 17.19 yuan on their first day of trading.

SAIC, the biggest automaker, gained 0.1 percent to 13.47 yuan today, extending this week’s advance to 6 percent after saying third quarter net income rose 1.4 percent to 5.35 billion yuan. Gree Electric Appliances Inc. declined 0.6 percent today, paring its weekly gain to 9.8 percent. The company reported third-quarter net income surged 57 percent. Consumer discretionary stocks rose the most this week among the the CSI 300’s 10 industry groups, gaining 3.4 percent.

China Resources Sanjiu Medical & Pharmaceutical lost 2.1 percent to 22.20 yuan, the lowest close since Sept. 3. A gauge of healthcare stocks gained the second most this week on the CSI 300, rising 3.1 percent.

In New York trading, The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rallied 2.6 percent to $37.75, the highest level since May 3. Qihoo 360 Technology Co. drove a 2.1 percent surge in the Bloomberg China-US Equity Index. AsiaInfo-Linkage Inc., a software developer mulling a buyout proposal, soared 6.5 percent after a fourth-quarter profit forecast beat analysts’ estimates.

-- Editors: Allen Wan, Darren Boey

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