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China’s Stocks Rise for First Time in Six Days

China’s Stocks in Hong Kong Poised for Correction on Tightening
The Hong Kong Exchanges & Clearing Ltd., logo, left, is displayed at the Hong Kong stock exchange in Hong Kong. Photographer: Lam Yik Fei/Bloomberg

March 14 (Bloomberg) -- Chinese stocks rose for the first time in six days, led by companies whose earnings are least vulnerable to economic growth.

ZTE Corp., China’s second-largest maker of phone network equipment, paced gains by telecommunication shares after saying it expects a “large” number of patents granted in Europe next year. Tasly Pharmaceutical Group Co. surged to a record as drugmakers climbed. China Resources Gas Group Ltd. led energy companies higher in Hong Kong after posting higher earnings.

The Shanghai Composite Index closed 0.3 percent higher at 2,270.28, following a five-day, 3.6 percent losing streak. Trading volumes in the measure were 35 percent lower than the 30-day average. The CSI 300 Index rose 0.3 percent to 2,534.27. The Hang Seng China Enterprises Index climbed 0.6 percent after earlier falling more than 10 percent from its Feb. 1 peak.

“Concerns about the slowing recovery and potential inflation threat still persist,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “As long as these concerns remain, stock-market rebounds will be weak.”

Concern the government will tighten monetary policy at the same time as economic expansion slows have dragged Chinese stock indexes down from their highs for the year, with the Shanghai index sliding 6.7 percent since Feb. 6. Data last weekend showed inflation accelerated in February, while industrial output had the weakest start to a year since 2009 and lending and retail sales growth slowed.

Inflation, Property

People’s Bank of China Governor Zhou Xiaochuan said yesterday the country should be on “high alert” over inflation and monetary policy is “no longer relaxed.” Housing and Urban-Rural Development Minister Jiang Weixin said property prices will decline this year amid curbs, the Shanghai Securities News reported today.

The Hang Seng China index has fallen 2.9 percent this year, while the Shanghai Composite is little changed, according to data compiled by Bloomberg. By contrast, the MSCI World Index of developed nations has rallied 6.9 percent.

Indexes tracking telecommunications and health-care companies rose more than 2 percent on the CSI 300 today. ZTE gained 8 percent to 11.93 yuan. The patents will generate significant competitive advantages against competitors in European market, the company said in a statement.

Tasly Pharmaceutical jumped 5.9 percent to 69.91 yuan. The CSI 300’s drugmaker index has surged 18 percent this year, compared with a 0.5 percent advance by the broader gauge.

Stock Valuations

China Resources Gas added 5.3 percent to HK$19.48, taking its advance for the year to 22 percent. The gas supplier said net income increased 38 percent last year.

The Hang Seng China index trades at 8.2 times earnings for the next 12 months, compared with the five-year average of 10.4, according to data compiled by Bloomberg. The Shanghai Composite is valued at 9.3 times.

Shanghai Pudong Development Bank Co. gained 2 percent to 10.45 yuan after saying profit rose 25 percent last year.

Xi Jinping was named China’s president by the national legislature, replacing Hu Jintao. Xi, 59, added the largely ceremonial title of president to his portfolio today after taking over the top post in the ruling Communist Party as well as chairmanship of the party’s military commission in November.

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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