China Stocks Rise to Six-Week High as Factory Data Spur Optimism

China’s stocks rose, sending the benchmark index to a six-week high, on optimism over the economy after new bank lending topped analysts’ estimates and industrial production growth accelerated.

Ping An Bank Co., Sinolink Securities Co. and Ping An Insurance (Group) Co. surged at least 1.8 percent to lead a rally for financial companies. BYD Co., the automaker partially owned by Warren Buffett’s Berkshire Hathaway Inc., led gains for consumer companies reliant on economic growth with a 5.9 percent advance. Pingdingshan Tianan Coal Mining Co. jumped 4.3 percent as energy producers climbed on higher oil prices.

The Shanghai Composite Index rose 0.9 percent to 2,070.72 at the close, the highest level since April 22. May data released over the past two days, including better-than-expected growth in retail sales and M2 money supply, fueled speculation government measures to put a floor on the economy are working.

“The data are showing the economy is stabilizing,” said Wang Zheng, chief investment officer at Jingxi Investment Management Co. “The market has expectations about further loosening of monetary policies and that’ll attract some buying sentiment.”

The CSI 300 Index gained 1.1 percent to 2,176.42. The Hang Seng China Enterprises Index added 0.8 percent. The Bloomberg China-US Equity Index retreated less than 0.1 percent yesterday.

Trading volumes in the Shanghai index were 31 percent higher than the three-month average today, according to data compiled by Bloomberg. The index has advanced 2 percent this week, the biggest weekly gain in two months, after the central bank cut the reserve-requirement ratio for some lenders.

Economic Data

Gauges of consumer-discretionary and financial companies in the CSI 300 rose 1.6 percent and 1.5 percent respectively, the most among 10 industry groups.

Ping An Bank advanced 4.2 percent for the steepest gain since April 8. Ping An Insurance jumped 2.2 percent. Sinolink Securities gained 1.8 percent and BYD added 5.9 percent.

Local-currency loans were 870.8 billion yuan ($140 billion), the People’s Bank of China said yesterday, higher than 42 out of 43 analyst estimates in a Bloomberg News survey. M2, the broadest measure of money supply, rose 13.4 percent, compared with a median projection for 13.1 percent.

“May is the first month this year we’ve seen a sizable easing of liquidity as evidenced by the strong new bank loans,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. “It suggests that policy makers are turning more serious about the downside risks to the economy and began ramping up pro-growth measures.”

Overweight China

Industrial output rose 8.8 percent in May from a year earlier and retail sales gained 12.5 percent, the National Bureau of Statistics said on its website today. Fixed-asset investment excluding rural households increased 17.2 percent in the first five months of the year, the agency said.

The advance in industrial production matched the median estimate in a Bloomberg News survey of 49 economists and compared with an 8.7 percent increase in April. Retail sales compared with the median projection for a 12.1 percent gain and an 11.9 percent increase the previous month.

Citigroup Inc. said in a report dated yesterday that it has an overweight allocations on Chinese stocks for the “first time in years” amid signs the economy is bottoming out.

Pingdingshan Coal gained 4.3 percent and Yanzhou Coal Mining Co. climbed 1.1 percent.

Oil futures rose for a third day in New York after advancing 2 percent yesterday, the most in two months, as violence escalated across northern and central Iraq, OPEC’s second-biggest oil producer. As China’s thirst for crude grows with the expansion of its emergency stockpiles and refining, the International Energy Agency estimates the nation is poised to surpass the U.S. as the world’s largest oil consumer by 2030.

The Shanghai Composite has dropped 2.1 percent this year on concern the economic slowdown will hurt earnings and new share offerings will divert funds. The index is valued at 7.6 times 12-month projected earnings, compared with the five-year average multiple of 11.7, according to data compiled by Bloomberg

— With assistance by Shidong Zhang

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