China’s stocks rose, with the benchmark index climbing from a five-month low, as companies linked to Shanghai’s free-trade zone rallied after the government eased rules on foreign investment.
Shanghai International Port (Group) Co. and Shanghai Waigaoqiao Free Trade Zone Development Co. jumped the most in a month after the cabinet said it had temporarily suspended laws to allow international shipping joint ventures in the zone. BesTV New Media Co. surged 8.4 percent after a 13-year ban on sales of game consoles by foreign-invested companies was halted. China Construction Bank Corp. led declines for lenders as three people familiar with the matter said the government imposed new controls on the shadow-banking industry.
The Shanghai Composite Index advanced 0.1 percent to 2,047.32 at the close. Shanghai, the nation’s commercial hub, last year inaugurated the zone as a testing ground for free-market policies that Premier Li Keqiang signaled may be implemented more broadly in the world’s second-largest economy.
“The government is steadily pushing forward the implementation of the detailed rules for the Shanghai free-trade zone,” said Wu Kan, a money manager at Dragon Life, which oversees about $3.3 billion. “The easing of restrictions on the gaming and telecommunication industries is all good by introducing foreign investment.”
The CSI 300 Index fell less than 0.1 percent to 2,238. The Hang Seng China Enterprises Index retreated 0.6 percent. The Bloomberg China-US Equity Inde slid 0.8 percent yesterday.
The Shanghai measure had slumped 3.3 percent in the first three trading days of 2014, the worst start to a year since 2002, as gauges of manufacturing and services industries fell. The China Securities Regulatory Commission approved four initial public offerings yesterday, bringing the total number of approved IPOs to 31 after a year-long suspension.
“Any gains are just a temporary rebound,” said Zhang Gang, a strategist at Central China Securities in Shanghai. “As long as there are more new stock listings, we may fall further and breach the 2,000 level. I can’t see any bottom for now.”
Shanghai International Port surged 7.9 percent to 5.17 yuan. Shanghai Waigaoqiao gained 2.5 percent to 30.72 yuan. BesTV New Media, which formed a game console venture with Microsoft Corp. in the zone, surged 8.4 percent to 40.28 yuan.
The State Council said yesterday that it had temporarily suspended laws to allow international shipping joint ventures and foreign-owned international shipping management firms in the zone. It also temporarily halted a ban on sales of game consoles by foreign-invested companies and delegated the task of drafting new rules to departments overseeing cultural matters. Consoles such as Microsoft’s Xbox 360 and Sony Corp.’s PlayStation were banned by China in June 2000.
Sichuan Kelun Pharmaceutical Co. jumped 4.5 percent to 48.38 yuan. A measure of drugmakers in the CSI 300 rose 0.8 percent for the steepest gain among 10 industry groups. Central China’s Zhang said he favors health stocks as well as telecom, environmental protection and consumption-related shares.
A gauge of financial companies in the CSI 300 dropped 0.5 percent, the second most among industries. China Construction, the nation’s second-biggest lender, slumped 1.7 percent to 4.01 yuan. Bank of China Ltd. declined 0.4 percent to 2.52 yuan.
The cabinet imposed controls on the multi-trillion-dollar shadow-banking industry with an order that targets off-the-books loans and shores up enforcement of current rules, two people familiar with the matter said.
The regulations include a ban on transactions designed to avoid regulations, such as moving interbank loans off balance sheets to reduce banks’ reported levels of lending, said the people, who asked not to be identified because the order hasn’t been made public. The rules were sent to ministries and local governments last month, the people said.
Separately, the government will allow a batch of three to five banks funded by private investment this year to operate under a trial as part of the country’s financial reforms, according to the China Banking Regulatory Commission.
China, the world’s largest IPO market in 2010 with a record $71 billion raised, hasn’t had an IPO since October 2012 as the securities regulator cracked down on fraud and misconduct among advisers and issuers. Fifty companies are expected to be ready by the end of January, the CSRC said Nov. 30 after pledging to move toward a U.S.-style IPO registration system.
The Shanghai gauge retreated 6.75 percent last year amid concern slowing economic growth will curb profits. It’s valued at 7.7 times projected 12-month earnings, the lowest level in at least five years, according to data compiled by Bloomberg. The economy may have expanded 7.6 percent in 2013, the weakest pace in 14 years, according to the State Council.
China’s equities will “have another disappointing year,” said Blackstone Group LP’s Byron Wien. Government policies to rebalance the economy toward the consumer and away from a dependence on investment spending will slow economic growth to 6 percent in 2014, he wrote in a statement.
The government will release trade and inflation data for December from as soon as tomorrow. Export growth probably slowed to 5.4 percent from 12.7 percent a month earlier, while inflation probably eased to 2.7 percent from 3 percent, according to Bloomberg surveys of economists.