The Shanghai Composite Index rose for a second day as investors speculated state-controlled companies will take steps to boost shareholder returns, countering losses in smaller companies and property developers.
China Petroleum & Chemical Corp. jumped 6.7 percent after China Business News reported the refiner may announce more restructuring next month and Goldman Sachs Group Inc. boosted its forecast for the Hong Kong-listed shares. PetroChina Co. surged 2.5 percent after Goldman Sachs recommended the stock. China Vanke Co. fell 1.4 percent as a gauge of property stocks extended losses to 10 percent during a six-day slide. Huayi Brothers Media Corp. dropped to the lowest level since November.
The Shanghai Composite rose 0.3 percent to 2,047.35 at the close, even as three stocks slid for every one that gained. Sinopec will probably introduce the next step of reform during next month’s legislative meetings in Beijing, Chairman Fu Chengyu said. The company’s commitment to reform means there will be improvement in valuations and management, said Li Xin, an analyst at Masterlink Securities Corp.
“This is a trend for state-owned companies going forward and investors think other petrochemical companies will follow,” Li said in Shanghai. “Also, as Sinopec is a leader in the industry, its actions will benefit others in the supply chain. There’s a multiplier effect.”
The Shanghai Composite climbed for a second day after valuations tumbled to 10.2 times reported earnings on Feb. 25, near its low of 10 times reached last month, according to data compiled by Bloomberg. The MSCI All-Country World Index has a multiple of 16.6. The Shanghai measure’s 30-day volatility jumped to a three-month high on Feb. 25 before receding as the yuan halted a six-day slide and money-market rates dropped.
The CSI 300 Index dropped 0.4 percent today. The Hang Seng China Enterprises Index advanced 1.5 percent. The Bloomberg China-US Equity Index rose 1.1 percent yesterday.
Sinopec, Asia’s largest refiner, rose for a third day, gaining 6.7 percent to 5.41 yuan in Shanghai. The stock jumped 5 percent to HK$6.97 after Goldman Sachs analyst Nilesh Banerjee boosted the share estimate to HK$8.65 from HK$7.30.
Sinopec will probably introduce the next reform stage during the time meetings of the National People’s Congress takes place, China Business News reported. The company said on Feb. 19 it will seek private investors for as much as 30 percent of its oil retail unit. The sale could raise more than $20 billion, according to Barclays Plc.
PetroChina, the biggest oil company, jumped 2.5 percent to in Shanghai and 2.1 percent in Hong Kong. The stock was raised to buy from neutral at Goldman Sachs, which cited continued benefits from an increase in natural gas prices.
China Vanke lost 1.4 percent. Property shares have slumped since the Shanghai Securities News reported Industrial Bank Co. suspended mezzanine financing for developers. At least 10 Chinese cities, many of them provincial capitals, have tightened local property policies since November.
The ChiNext Index slid 3.5 percent to the lowest close since Jan. 21. Filmmaker Huayi slumped 5.5 percent to 24.44 yuan. A measure of health-care companies in the CSI 300 lost 3.4 percent, the biggest drop among the industry groups. Kangmei Pharmaceutical plunged 4.6 percent to 16.88 yuan.
“The market isn’t stable yet and even if we have some gains, it’s very short-term,” said Zhang Yanbing, analyst at Zheshang Securities Co. in Shanghai. “I reckon this trend of decline will continue as there are persistent concerns about economic data, property and valuations. I suggest buying only after the meetings in March when reform details are clearer,” he said, referring to the annual meeting of the NPC that begins March 5.
The Chinese currency slipped 0.1 percent to 6.1280 against the dollar. The yuan has gone from being the most attractive carry trade bet in emerging markets to the worst in the space of two months as central bank efforts to weaken the currency cause volatility to surge.
A weakening yuan is a “message from People’s Bank of China that the country is moving towards a market economy,” Dennis Lim, senior managing director of Templeton Emerging Markets Group, said today in Singapore.