China’s stocks rose the most in a week, led by consumer and technology companies, after the government called for “unrelenting” implementation of economic policies including increased domestic consumption.
Shanghai Metersbonwe Fashion & Accessories Co. jumped 10 percent, leading gains in consumer companies reliant on economic growth, after Shenyin & Wanguo Securities recommended the stock. Shanghai Baosight Software Co. paced the rally in technology shares after signing a contract to provide data-center services to Alibaba Group Holding Ltd. Yunnan Copper Industry Co. slid 4.6 percent, the most since June, as rising stockpiles indicated slowing demand for the metal.
The Shanghai Composite Index rose 1.6 percent to 2,229.24 at the close, the biggest gain since Oct. 11. The government will boost financial support to small businesses, cut overcapacity and look for new engines to drive consumption, the State Council said in a statement yesterday. The nation’s leaders will meet in November to map out policies to reform the economy and sustain long-term growth at about 7 percent.
“There are lots of positive expectations about economic reforms including boosting domestic consumption before next month’s Communist Party meeting,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “The economy is stabilizing and data are improving, which adds confidence to the market.”
The CSI 300 Index advanced 1.9 percent to 2,471.32. The Hang Seng China Enterprises Index slipped 0.2 percent. The Shanghai Composite fell 1.5 percent last week as companies linked to Shanghai’s free-trade zone tumbled on concern gains were excessive. The index has rebounded 14 percent from its four-year low on June 27.
Measures of consumer discretionary and staples producers in the CSI 300 rose at least 3.5 percent, the biggest gains among 10 industry groups.
Shanghai Metersbonwe surged to the highest level in a year. Shenyin & Wanguo upgraded its rating on the stock to buy today, citing an earnings “inflection point” next year. The company said in an exchange statement it plans to offer 6.6 million shares as incentives to two executives.
Qingdao Haier Co., China’s biggest refrigerator maker, jumped 10 percent to 16.73 yuan after the stock was rated buy in new coverage at UBS AG.
China’s economic expansion accelerated to 7.8 percent in the third quarter from a year earlier, the statistics bureau said Oct. 18, reversing a two-quarter slowdown that put the government at risk of missing its 7.5 percent growth target for 2013.
While the economy is “stable and trending for the better,” and the nation has the ability to achieve this year’s targets, the foundations of the rebound are “not yet firm,” the State Council, or cabinet, said in the statement.
Next month’s gathering will be the third full meeting of the party’s current Central Committee, including President Xi Jinping, Premier Li Keqiang, ministers and the heads of the biggest state firms and banks. It was at such a third plenum in late 1978 that Deng Xiaoping and his allies inaugurated a series of reforms that began to open up China to foreign investment and loosen state controls over the economy.
A measure of technology companies in the CSI 300 added 2.9 percent, the third-biggest gain among industry groups. Shanghai Baosight Software surged by the 10 percent daily limit to 33.18 yuan. Neusoft Corp. gained 4.5 percent to 17.60 yuan.
The Shanghai Composite trades at 8.8 times projected earnings for the next 12 months, compared with the seven-year average of 15.4, according to data compiled by Bloomberg.
Yunnan Copper, the fourth-largest producer, slumped 4.6 percent to 9.44 yuan. Copper prices declined as stockpiles in China rose for a third week. The company said on Oct. 14 its net loss probably widened to as much as 1.55 billion yuan ($254.3 million) in the first nine months from 40.5 million yuan a year earlier.
China’s listed companies are required to release third-quarter earnings by the end of the month.
The nation’s smaller companies, the world’s best performers after shares more than doubled since December, are poised to retreat as earnings disappoint investors, according to Central China Securities Co.
The ChiNext Index has gained 136 percent since last year’s low on Dec. 3, compared with a 6.5 percent advance by the MSCI Emerging Markets Small Cap Index and a 17 percent increase in the CSI 300. The ChiNext jumped 3.8 percent today.
“Small-cap stocks have likely already peaked,” said Li Jun, a strategist at Central China Securities in Shanghai. “The shares have been ramped up this year because investors believe they represent the future of China’s economy. The rally will reverse as the economy slows and profits miss estimates.”
— With assistance by Shidong Zhang