China Stocks Rebound From Lowest Level Since 2009; Ping An Gains

China’s Stocks Drop to Lowest Since 2009, Led by Liquor Shares
A man walks past a display showing stock prices at a securities exchange hall in Shanghai, China. Photographer: Qilai Shen/Bloomberg

China’s stocks rose, spurring a rebound for the benchmark index from the lowest level since January 2009, after valuations fell to a record.

Ping An Insurance (Group) Co. climbed 2.1 percent and Anhui Conch Cement Co. advanced for a fifth day as Haitong Securities Co. recommended insurance and cement stocks for next year. Bank of Communications Co. advised investors to buy cyclical stocks in the first half of 2013. PetroChina Co., the most heavily weighted stock on the index, gained the most in more than two months after valuations plunged to an all-time low last week.

The Shanghai Composite Index added 0.8 percent to 1,975.14 at the close, erasing a drop of as much as 0.5 percent. The CSI 300 Index advanced 1.1 percent to 2,131.47, while the Hang Seng China Enterprises Index rose 0.5 percent. The Bloomberg China-US 55 Index lost 0.9 percent in New York.

“The stock index has fallen a lot so it’s natural for investors to play catch up,” Huang Xuejun, a strategist at Guoshen Securities Co., said by phone in Shanghai. “However the gain won’t be sustainable nor huge because we haven’t seen any new policy stimulus. The index is unlikely to rise too much the rest of the year.”

The Shanghai Composite trades at 10.9 times reported earnings, the lowest level since at least 1997, according to data compiled by Bloomberg. The index has fallen 10 percent this year, heading for a third straight year of losses, amid estimates the economy will grow at its slowest pace in a more than a decade this year.

Trading volumes in the Shanghai Composite were 4.7 percent above the 30-day average, according to data compiled by Bloomberg. Thirty-day volatility in the gauge was at 13.8, compared with this year’s average of 17.2.

Growth Outlook

China may maintain its annual economic growth target at 7.5 percent next year in a sign the new leadership headed by Xi Jinping won’t tolerate a bigger slowdown.

Nine of 16 analysts surveyed Nov. 22-30 by Bloomberg News forecast the government will set a goal unchanged from 2012, while six expect a decline to 7 percent and one sees an increase to 8 percent. Top economic officials meet this month to map out policies for 2013 and may set the target that will be officially announced in March at the annual session of parliament.

China’s stocks will perform better next year as the economy and liquidity improve, according to Bank of Communications.

The economy is “reflating” given signs of rising inflation and bottoming growth, Hao Hong, Hong Kong-based managing director of research, said in a report to clients.

Investors should buy cyclical stocks in the first half of 2013 and so-called defensive companies in the second half, he said. Hong was the only strategist among 13 brokerages surveyed by Bloomberg at the start of the year to forecast declines for Chinese stocks in 2012.

Ping An

A gauge of financial companies in the CSI 300 including brokerages and insurers rose 1.3 percent, the third most among 10 industry groups.

Ping An, the second-biggest insurer, advanced 2.1 percent to 37.39 yuan and Anhui Conch, the largest cement producer, rose 0.6 percent to 16.61 yuan after Haitong Securities recommended investors buy insurers and cement stocks for next year. The Shanghai Composite may trade between 1,850 and 2,450 in 2013 as earnings bottom out and possible system reforms after China’s leadership change bolster confidence, Haitong Securities said in a report.

The ratio of outstanding puts to sell Ping An versus calls to buy slipped to 1.15-to-1 on Nov. 30 and reached 1.11 on Nov. 29, the lowest since August 2007, according to data compiled by Bloomberg. New China Life Insurance Co. added 4 percent to 19.72 yuan.

Brokerages Gain

Sinolink Securities Co. jumped 6.6 percent to 12.91 yuan, the most since Nov. 6. Haitong Securities advanced 3.2 percent to 8.15 yuan. China should further improve laws for companies’ public offerings, bond and private equity markets, as well as asset management, China Securities Regulatory Commission Chairman Guo Shuqing wrote in the Shanghai Securities News.

PetroChina, the nation’s biggest energy producer, rebounded 1.3 percent to 8.58 yuan. The stock trades at 11.8 times reported earnings, near the record low of 11.6 set on Nov. 30.

Liquor maker Jiuguijiu Co. rose 10 percent to 30.05 yuan, paring losses over the past month to 47 percent. The company said it has resumed a packaging production line after halting output amid concerns of excessive chemicals in its drinks.

H Shares

Chinese companies traded on the mainland were 3.3 percent cheaper than their Hong Kong-listed counterparts as of yesterday, according to an index from Hang Seng Bank Ltd. The discount, which last week was the widest since January 2011, shows global investors are more optimistic than locals on the country’s growth prospects.

The H-shares index has jumped 16 percent since Sept. 5. Yuan-denominated shares are restricted to domestic investors and a limited number of foreign institutions, while their Hong Kong counterparts are open to overseas investors.

The Shanghai Composite will rally 48 percent within nine months after its decline below 1,960 signaled selling has climaxed, according to Tom DeMark, the creator of indicators to show turning points in securities.

The index will advance to 2,900 after its decline produced a buy signal on the Sequential and Combo charts, designed to identify market tops and bottoms, said DeMark, who has spent more than 40 years developing market-timing indicators.

“Everyone is negative on SHCOMP index, absolutely everyone,” DeMark wrote in an e-mail, referring to the Chinese benchmark gauge’s ticker symbol. “And now is the perfect environment to make a low and be positive as the last seller, figuratively speaking, has sold.”

-- Editors: Allen Wan, Richard Frost

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