China Stocks Reverse Loss as Retail Data Fuel New Economy Shares

  • Retail sales grow 11% in October, fastest rate this year
  • Energy, material shares slump as industrial output misses

China’s stocks rose for the fifth time in six days, led by technology and health-care companies, as accelerating retail sales signaled headway in government efforts to reorient its manufacturing-dominated economy toward consumption and services.

The Shanghai Composite Index erased losses in the last 10 minutes of trading, adding 0.3 percent to 3,650.25 at the close. Wangsu Science & Technology Co. and Jiangsu Hengrui Medicine Co. surged at least 4.9 percent to pace gains for technology and drug companies. Wednesday’s data showed retail sales climbed 11 percent last month for the quickest gain this year, while industrial output grew slower than forecast. Energy and material shares slumped.

President Xi Jinping’s government is trying to boost the role of privately owned technology and service businesses, while downsizing state-run industrial and financial giants. Official data show the growing importance of service industries, which make up more than half the economy and expanded at a 8.4 percent pace in the first nine months of 2015. That compares with 6 percent growth in the industrial and construction sectors.

“The retail sales data were a positive boost to sentiment,” said Ronald Wan, chief executive at Partners Capital International in Hong Kong. “Targeted measures as well as the holiday effect helped with consumption last month. A transition towards consumer-driven economy is taking place, albeit at a slow pace.” He’s positive on companies involved in child-care products, education, tourism and services.

Bull Market

The Shanghai Composite, which entered a bull market last week, has rebounded 25 percent since the August low, spurred by six cuts in interest rates within a year and signs that the government’s unprecedented measures to stem a $5 trillion rout have stabilized equities.

China’s “national team” is unlikely to keep actively buying equities as it had been doing because calm has returned to the stock market as shown by the government’s willingness to resume initial public offerings, Kinger Lau, Chinese equity strategist at Goldman Sachs Group Inc. in Hong Kong, said in an interview in Bloomberg’s office in Shanghai on Wednesday. Lau is sticking with his 12-month forecast of 4,000 for the CSI 300 Index.

The CSI 300 closed little changed at 3,833.65 on Wednesday. The ChiNext index of small-cap companies jumped 2.1 percent in Shenzhen. Hong Kong’s Hang Seng China Enterprises Index slid 0.7 percent, while the Hang Seng Index slipped 0.2 percent.

Economic Data

Gauges of health-care and technology companies in the CSI 300 rose at least 1.1 percent for the steepest gains among 10 industry groups. Beijing SL Pharmaceutical Co. and Glodon Software Co. both jumped 4.5 percent. Jiangxi Copper Co. and Yanzhou Coal Mining Co. led declines for material and energy shares with losses of at least 1.7 percent.

China’s industrial output matched the weakest gain since the global credit crisis last month, while better-than-expected retail sales underscored a shift in the economy toward greater reliance on consumer spending as old growth engines falter.

Industrial output rose 5.6 percent in October from a year earlier, compared with the median forecast for a 5.8 percent gain. Fixed-asset investment increased 10.2 percent in the first 10 months -- the slowest pace since 2000.

Singles’ Day

President Xi Jinping said China will speed up reforms to boost economic growth, including stepping up policies to improve the efficiency of the nation’s bloated state-owned companies. China should accelerate moves to supervise the stock market and protect investors, the official Xinhua News Agency reported him as saying at a meeting Tuesday.

Chinese authorities will probably make an announcement on the start date for the Hong Kong-Shenzhen link by early next year and the launch may occur in March or April, Goldman Sachs’ Lau said. The start date is most likely by April because MSCI Inc. needs a few months to assess global investors’ reaction to the Shenzhen link before deciding whether to include mainland equities in its emerging-market indexes for June review, he said.

Suning Commerce Group Co. slumped 2.7 percent, paring a rally over the past month to 26 percent ahead of Singles’ Day, the biggest shopping event of the year. Alibaba Group Holding Ltd. bought a 19.99 percent stake in the e-commerce company in August.

Singles’ Day, a Chinese twist on Valentine’s Day, was started by Alibaba on Nov. 11, 2009 and was copied by rivals and has morphed into China’s biggest excuse to shop online. When written numerically, the date is reminiscent of “bare branches,” the Chinese expression for bachelors and spinsters.

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