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China Stocks Rise as Auto, Technology Shares Gain; Moutai Drops

China Stocks Rise Most in a Week as Shenhua Gains; Moutai Drops
The Shanghai Composite has risen 9.9 percent since Dec. 3. Photographer: Qilai Shen/Bloomberg

China’s stocks rose, extending a weekly gain, as rallies for automakers and technology companies overshadowed losses for consumer-staples producers.

SAIC Motor Corp. led an advance for automakers after Shenyin & Wanguo Securities said car sales jumped 20 percent in the first two weeks of this month. BOE Technology Group Co., China’s biggest maker of liquid-crystal-display panels, climbed the most in two weeks after it said it will set up a company with the Chongqing government. Liquor maker Kweichow Moutai Co. slid 5.6 percent after authorities announced measures to rein in luxury spending by military officials.

“There’s a light news flow,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “We’ve seen a decent rally this month and buying sentiment will probably continue after stocks consolidate around this level. The economic momentum remains unchanged.”

The Shanghai Composite Index rose 0.3 percent to 2,159.05 at the close, adding to a 0.1 percent gain last week. The CSI 300 Index gained 0.4 percent to 2,381.22. The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong advanced 0.4 percent. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, fell 1.3 percent in New York on Dec. 21.

The Shanghai Composite has risen 10 percent since Dec. 3, when it closed at its lowest level since January 2009, on signs the economic recovery is gathering momentum. The measure, down 1.6 percent this year, trades at 10.5 times estimated earnings, the highest since May, according to weekly data compiled by Bloomberg.

Rising Liquidity

Trading volumes in the Shanghai index were 2.8 percent higher than the 30-day average today. Thirty-day volatility in the gauge was at 19.4, compared with this year’s average of 17.

Supplies of cash in China are the most plentiful in three years in the run-up to public holidays, after policy makers told the central bank to ensure companies have enough funds to support economic growth.

The seven-day repurchase rate, a gauge of interbank funding availability, averaged 3.05 percent in December, the lowest for this month since 2009 and down from 3.89 percent a year earlier, according to the National Interbank Funding Center. The central bank has conducted reverse-repurchase contract operations twice a week since July to meet lenders’ cash needs, and injected a net 92 billion yuan ($14.8 billion) of capital into the financial system last week.

Auto Sales

SAIC Motor, China’s largest carmaker, added 0.9 percent to 16.63 yuan. FAW Car Co., which makes cars in China with Volkswagen AG, jumped 8.9 percent to 8.58 yuan. Jiangsu Yueda Investment Co., which makes cars with Kia Motors Corp., gained 3.8 percent to 11.57 yuan.

Shenyin & Wanguo said car sales rose 20 percent in the first two weeks of this month, compared with a year earlier. Auto demand will improve and the valuation expansion for industry stocks will continue, Li Xiaoguang, an analyst at the brokerage, wrote in a report today.

BOE surged 5.1 percent to 2.25 yuan, its biggest gain since Dec. 5. BOE and the Chongqing city government will set up a company with registered capital of 26 million yuan ($4.2 million), according to an exchange statement.

A gauge of consumer-staples stocks in the CSI 300 tumbled 2.2 percent, the most among 10 industry groups. Kweichow Moutai, the biggest maker of baijiu liquor, slumped 5.6 percent to 204.58 yuan. Wuliangye Yibin Co., the second largest, fell 3 percent to 26.94 yuan. Jiangsu Yanghe Brewery Joint-Stock Co. slid 5 percent to 87.43 yuan.

Luxury Ban

The new rules for high-ranking military officials include bans on extravagant banquets and staying in civilian or military hotels with luxury perks, the official Xinhua News Agency reported on Dec 22.

“Although the ban is a sweeping ban on most luxury spending, baijiu is probably the most visible and obvious product,” Wang Ping, an analyst at Great Wall Securities Co. in Shenzhen, said by phone today. “This will add pressure to the excess inventory problem already faced by baijiu makers such as Moutai.”

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., declined 1.3 percent on Dec. 21 for a weekly loss of 0.3 percent.

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