China’s Stocks Rise to Highest in Four Months, Led by Brokerages

China’s stocks rose, sending the benchmark index to the highest level in four months, as brokerages rallied on speculation financial industry reforms and economic growth will boost profit.

Citic Securities Co. climbed 2 percent, extending gains to 12 percent over the past week, after the China Securities Journal reported the government may let foreign funds trade stock-index futures. Real-estate shares advanced for the first time in four days, extending the biggest gains among industry groups in the Shanghai Composite Index this year. Huaxia Bank Co. led a slide for lenders after Bank of Communications Co. said banks may report slowing profit growth next year.

The Shanghai Composite rose 0.3 percent to 2,168.35 at the close, the highest since Aug. 10. The index has rebounded 11 percent since slumping to an almost four-year low on Dec. 3 amid speculation economic growth is stabilizing. The CSI 300 Index jumped 0.6 percent to 2,384.82.

“This recent rally has been more sustainable than previous times this year, showing confidence is returning to investors,” said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. “Property and financials have been leading this round of gains. Local fund managers are also turning to these industries to park their money.”

The Shanghai Composite has dropped 1.4 percent this year, heading for a third straight annual loss. The measure trades at 12 times reported earnings, the highest since July, after valuations fell to 10.8 this month, the lowest level since at least 1997, data compiled by Bloomberg show. Shanghai trading volumes were up 35 percent from the 30-day average.

The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong dropped 0.6 percent. The Bloomberg China-US Equity Index gained 0.4 percent yesterday in New York.

Brokers Jump

Citic Securities, the nation’s biggest-listed brokerage, gained 2 percent to 12.04 yuan. Haitong Securities Co. jumped 2 percent to 9.51 yuan. Hong Yuan Securities Co. advanced 2.3 percent to 17.49 yuan.

CCB International said that brokerages are the best way to invest in a market rebound. Citic and Haitong were’s CCB’s top picks among Chinese brokerages, according to a report this week from Silvia Fun, a Hong Kong-based analyst.

China may let foreign funds trade stock-index futures, broadening the range of instruments in a program for institutional investors, the China Securities Journal reported.

QFII Reform

China last week scrapped a ceiling on QFII investments by overseas sovereign wealth funds and central banks, part of government efforts to encourage long-term foreign ownership and shore up slumping equities. The quota for the QFII program, which allows foreign investors to buy yuan-denominated securities in China, was increased to $80 billion in April.

The government may relax or abolish a rule that requires Renminbi Qualified Foreign Institutional Investors to keep most of their funds in bonds, the Hong Kong Monetary Authority said last week.

A gauge of material producers in the CSI 300 jumped 1.8 percent, the most among 10 industry groups in the CSI 300. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., China’s biggest producer, surged 6.9 percent to 38.26 yuan, the highest close since Aug. 14. Rising Nonferrous Metals Share Co. jumped 10 percent to 54.14 yuan.

China’s quota for rare earths exports will be unchanged next year, the China Daily reported today, citing Liu Yinan, vice chairman of the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters.

Stable Prices

The price of rare earths should remain stable and export volumes in 2013 should be similar to 2012, the newspaper cited Liu as saying.

A measure of real-estate stocks in the Shanghai index advanced 1.5 percent today. The index has rallied 24 percent this year, the most among five industry groups.

China Vanke Co., the country’s largest listed developer, advanced 1.8 percent to 9.48 yuan, the highest since Dec. 14. Poly Real Estate Group Co. increased 1.6 percent to 12.32 yuan.

Chinese banks’ profit growth may slow to between 7 and 8 percent in 2013 from an estimated 17 percent increase this year, as non-performing loans climb amid a slowing economy and more borrowers resort to bond financing, according to Bank of Communications.

Banks may extend 9 trillion yuan ($1.4 trillion) of new loans next year, compared with a forecast of 8.4 to 8.5 trillion yuan this year, BoCom said in a research note yesterday.

China Citic Bank declined 0.7 percent to 4.10 yuan. Huaxia Bank, in which Deutsche Bank AG has a stake, slumped 1 percent to 9.73 yuan.

Rate Outlook

Expectations are building for China to raise interest rates from the second half of 2013 as a brightening outlook for Asia’s biggest economy fans concern inflation will accelerate. Industrial production and retail sales rose last month at the fastest pace since March, boosting the recovery from a seven-quarter slowdown.

The People’s Bank of China will boost its one-year deposit rate of 3 percent by at least a quarter of a percentage point next year, according to nine out of 23 economists surveyed this month by Bloomberg. Policy makers last raised borrowing costs in July 2011.

“No one is talking about inflation now but it will become a catch word for China next year and they will have to raise rates in the second half,” said Rob Subbaraman, the Hong Kong-based chief economist and head of fixed-income research for Asia ex-Japan at Nomura Holdings Inc.

-- Editors: Allen Wan, Matthew Oakley