Most Chinese Stocks Rise as Tech Rallies, Developers Drop

Poly Real Estate Construction Site
Cranes operate at a Poly Real Estate Group Co. residential construction site in the Pazhou district of Guangzhou. Poly Real Estate, the second-biggest developer, fell 3 percent to 7.41 yuan. Photographer: Brent Lewin/Bloomberg

May 5 (Bloomberg) -- Most Chinese stocks rose after a two-day holiday as railway and technology companies rallied. Property developers slumped on a plunge in home sales.

Train makers China CNR Corp. and CSR Corp. climbed at least 1.6 percent. Apple Inc. supplier Goertek Inc. jumped the most in two weeks. Poly Real Estate Group Co. and Gemdale Corp. dropped more than 2 percent after Centaline Group said new housing sales tumbled 47 percent to a four-year low during the May 1-3 holidays. Aluminum Corp. of China Ltd. slid 2.2 percent after a private manufacturing report showed a contraction last month.

The Shanghai Composite Index added 0.1 percent to 2,027.35 at the close, erasing a loss of as much as 0.9 percent. A measure of technology shares in the CSI 300 Index, the worst performer among 10 industry groups in the past three months, rose 0.9 percent today for the steepest gain. The ChiNext index of small-company shares climbed 1.5 percent, paring losses since this year’s February peak to 16 percent.

“Small-cap stocks and tech shares had fallen too much,” Tebon Securities Co. analyst Zhang Haidong said in Shanghai. “There were concerns before on how valuations are too high.”

The CSI 300 Index lost 0.1 percent, while the Hang Seng China Enterprises Index retreated 0.6 percent. Trading volumes in the Shanghai Composite were 24 percent below the 30-day average as China’s markets resumed today after being shut for the holidays on May 1-2. The Bloomberg index of the most-traded Chinese shares in the U.S. climbed 0.5 percent on May 2.

Rail Budget

Shenzhen O-film Tech Co. jumped 10 percent, leading tech companies higher. Goertek gained 2.9 percent. Valuations for technology and health-care stocks are about 15 percent lower than their peak levels in February, suffering from a broad-based rotation away from growth and momentum stocks, according to Bloomberg Industries.

China CNR gained 2.2 percent. CSR advanced 1.6 percent. Credit Suisse Group AG said that an increase in the nation’s railway budget was a “positive surprise.” China Railway Corp., the state monopoly that owns the train network, said April 30 that the investment budget for this year will be boosted to 800 billion yuan ($128 billion) from a previous spending plan for 630 billion yuan to 650 billion yuan, HSBC Holdings Plc analysts led by Lesley Liu wrote in a note.

A gauge of property developers in the Shanghai index slid 1.5 percent, the biggest loss among the five industry groups. Poly Real Estate, the second-biggest developer, fell 3.4 percent, while Gemdale lost 2.8 percent.

Home Sales

New home sales fell 47 percent over the holidays to the lowest level in four years in 54 cities, Centaline Group said in a report dated yesterday.

“Property prices will correct this year in China,” Gao Jian, an analyst at Northeast Securities Co., said by phone from Shanghai. “Sales volume is retreating. I don’t see a suitable entry point for property stocks for now.”

Chalco, as Aluminum Corp. of China is known, slid 2.2 percent to 3.06 yuan. Jiangxi Copper Co., the biggest producer of the metal, lost 0.6 percent to 12.05 yuan.

China’s manufacturing contracted for a fourth month, according to the HSBC survey. April’s final number of 48.1 compared with 48 the previous month and a 48.4 median estimate from analysts surveyed by Bloomberg News. Numbers below 50 indicate contractions. The data show the challenge for Communist Party leaders trying to set a floor under growth while rolling out changes such as an increased role in the economy for private investment.

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To contact the editors responsible for this story: Michael Patterson at Allen Wan