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Guangzhou Auto Stock Jumps on Licensing Rule Speculation

May 27 (Bloomberg) -- Guangzhou Automobile Group Co. surged by the 10 percent daily limit in Shanghai trading on speculation a proposal to allow unlimited reuse of license plates in the city where its based will spur vehicle sales.

The automaker, which has manufacturing ventures with Toyota Motor Corp. and Honda Motor Co., rose to 9.15 yuan as of 2:45 p.m. The benchmark Shanghai Composite Index was little changed. The stock has climbed 86 percent since last year’s low in November as Japanese brands recovered from the consumer backlash triggered by a territorial dispute.

The government of Guangzhou, where the company is based, released a consultation paper on May 25 outlining revisions to its policy of distributing license plates. The proposed changes come less than a year after the city government imposed an annual quota of 120,000 new license plates to rein in congestion and air pollution.

“The proposals are good news for auto sales in the city,” Harry Chen, an analyst with Guotai Junan Securities Co. in Shenzhen, said in a telephone interview. “Guangzhou Auto is also benefiting from the recovery in sales and introduction of new models.”

Guangzhou uses both an auction and lottery to distribute the license plates. Other cities in China that cap the number of new vehicles include Beijing, which uses a monthly lottery, and Shanghai, where successful bids exceeded 90,000 yuan ($14,700) this year.

Guangzhou Auto, which also produces the Viaggio car with Fiat SpA, will manufacture some Jeep models with the Turin, Italy-based carmaker.

To contact Bloomberg News staff for this story: Tian Ying in Beijing at ytian@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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