China’s stocks rose the most in three months after the government allowed insurers to invest more in banks and investors speculated profits at construction and cement companies will increase.
Sany Heavy Industry Co. jumped 10 percent and Anhui Conch Cement Co. climbed to a six-month high as analysts said the first meeting by the ruling party under new leader Xi Jinping signaled increased urban development. Industrial Bank Co. led a gauge of financial stocks to the biggest gain in two months as a regulation limiting investment in banks by insurers was abolished. Ping An Insurance (Group) Co. of China Ltd. jumped 4.1 percent as HSBC Holdings Plc agreed to sell its stake.
The Shanghai Composite Index surged 2.9 percent to 2,031.91 at the close, capping the biggest advance since Sept. 7. Trading volumes were 102 percent above the 30-day average, according to data compiled by Bloomberg. The CSI 300 Index rose 3.6 percent to 2,207.88, with the materials, industrial and financial gauges climbing at least 3.6 percent.
“Lately, the government had been relaying messages about improving the economy, in particular its plans for urbanization,” said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. Investors “see a clearer direction and roadmap for government reforms,” Mao said.
The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong increased 2.7 percent. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, lost 0.1 percent in New York. Thirty-day volatility in the Shanghai gauge was at 16.5, compared with this year’s average of 16.9.
A gauge of material companies in the CSI 300 rallied 4.2 percent, the second-most among the 10 industry groups. Sany Heavy, China’s biggest machinery maker by market value, jumped 10 percent to 8.60 yuan. Guangxi Liugong Machinery Co. surged 10 percent in Shenzhen. Anhui Conch, the largest cement company, advanced 4.9 percent to 17.42 yuan.
Poly Real Estate Group Co. led gains for developers, advancing 1.9 percent to 12.08 yuan. China Vanke Co., the biggest developer, increased 2.1 percent to 9.14 yuan after the company said the value of its sales doubled last month.
“There was a Politburo meeting yesterday and there’s talk they may have touched on urbanization projects, so you can see that cement, financials and developers are leading the market higher,” said Du Liang, an analyst from Shanxi Securities Co.
China will expand domestic demand, actively promote urbanization, strengthen real-estate controls and support small business, the Xinhua News Agency said yesterday, citing a statement issued after a meeting of top leaders headed by Xi, who will probably succeed Hu Jintao as president in March. The government will also encourage consolidation in industries with overcapacity, it said. Leaders will make efforts to keep investment growth steady, Xinhua said.
Urbanization is a “huge engine” for growth in China, Li Keqiang, set to become premier in March, wrote in a full-page article in the People’s Daily in November. As many as 300 million people will move from the countryside by 2030, to join 600 million already living in cities, the Organization for Economic Cooperation and Development estimates. The proportion of China’s population in cities swelled to 51 percent by the end of 2011 from about 39 percent over the past decade.
Ping An, the nation’s second-biggest insurer, gained 4.1 percent to 38.92 yuan, the most since Sept. 7. Thai billionaire Dhanin Chearavanont’s Charoen Pokphand Group Co. will buy the 15.6 percent stake in Ping An for about HK$59 a share, giving the U.K. bank a $2.6 billion profit, London-based HSBC said in a statement today.
“The announcement of the sale of the entire stake removed some overhang concern on Ping An’s share price,” Arjan van Veen, a Hong Kong-based analyst at Credit Suisse Group AG, said.
The HSBC deal spurred gains in other insurers, with New China Life Insurance Co. surging 10 percent to 21.69 yuan, its biggest gain since June. China Life Insurance Co., the nation’s biggest insurance company, added 10 percent to 21.69 yuan.
China has abolished a regulation on insurance companies’ investment limits in commercial banks, according a statement posted on the China Insurance Regulatory Commission’s website yesterday.
Insurers were limited to investing in a maximum of two banks if their ownership exceeded 5 percent under rules published in 2006, when the regulator ended a 13-year ban barring insurance firms from expanding into banking and securities businesses.
Industrial & Commercial Bank of China Ltd., the world’s biggest lender by market value, rose 1.6 percent to 3.90 yuan. Industrial Bank jumped 6.1 percent to 13.48 yuan. Huaxia Bank Co. added 5 percent.
Today’s rally for the Shanghai index narrowed losses this year to 7.6 percent this year, the worst performing major market in Asia. The measure trades at 11.2 times reported earnings, compared with a record low of 10.9 set on Nov. 30, according to data compiled by Bloomberg.
Chinese stock investors emptied trading accounts at the fastest pace in 16 months last week.
The number of Chinese stock accounts containing money dropped by 205,000 to 55.6 million, the largest decline since the week ended July 8, 2011, according to regulatory data compiled by Bloomberg. The number of funded accounts slid to the lowest level since the week through Nov. 26, 2010, after reaching a high of 57.28 million in June 2011.
“China’s domestic A-share market is one of the worst-performing equity markets in the world,” Tao Wang, chief China economist at UBS AG in Hong Kong, wrote in a note dated yesterday. “In the coming quarters, we do expect corporate earnings to recover, along with the economy, as destocking ends and output prices recover,” while the government will continue to push for reforms of initial public offerings, he wrote.
-- Editors: Allen Wan, Chan Tien Hin