China’s Stocks Advance to Five-Month High as Developers Rally
China’s stocks rose, driving the benchmark index to the highest level in five months, after property developers rallied on speculation the government’s urbanization plan will support housing demand.
Poly Real Estate Group Co. (600048) and Gemdale Corp. climbed at least 1.9 percent as the Shanghai Securities News reported residency controls in smaller cities will be loosened. Beijing Jingyuntong Technology Co., a maker of photovoltaic equipment, gained after LDK Solar Co. was ordered to pay compensation to the company for contract breach. SAIC Motor Corp. (600104), the biggest Chinese automaker, dropped the most in two months after technical indicators signaled the stock was overbought.
The Shanghai Composite Index (SHCOMP) added 0.3 percent to 2,219.13 at the close, its highest level since July 6. The measure jumped 2.5 percent yesterday, wiping out this year’s losses of as much as 11 percent and climbing above its 200-day moving average. The CSI 300 Index (SHSZ300) rose 0.4 percent to 2,457.62 today, while Hong Kong’s market was closed for holidays.
“The momentum is still there as the economy continues to recover and new leaders promise more reforms to boost growth,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “The market might have some fluctuations at this level but the trend is upward.”
The Shanghai Composite, up 0.9 percent this year, trades at 10.9 times estimated earnings, compared with 12 times for the MSCI Emerging Markets Index, according to weekly data compiled by Bloomberg. Thirty-day volatility in the gauge was at 20.1, compared with this year’s average of 17.
Trading volumes in the Shanghai measure were 53 percent higher than the 30-day average today. The index has risen 13 percent since this year’s closing low of 1,959.77 on Dec. 3 as the nation’s new leaders said they would promote urban development as part of economic reforms.
China’s largest cities including Beijing, Shanghai and Guangzhou will limit populations under a new urbanization plan, while smaller cities and towns will loosen controls on residency, the Shanghai Securities News reported, citing an unidentified person.
The country will also improve infrastructure and public services for transportation, communication, sewage and garbage disposal, health-care and education in urban areas, the report said. Urbanization is expected to spur 40 trillion yuan ($6.4 trillion) of investment by 2020, the Southern Metropolis Daily reported yesterday, citing a draft plan by the National Development and Reform Commission on urbanization.
“Developers are gaining on the government’s call to use urbanization as a new engine for growth,” urbanization as a new engine for growth,’’ Gao Jian, an analyst at Northeast Securities Co., said in a phone interview.
A measure of property stocks in the Shanghai Composite climbed 2.2 percent today, extending yesterday’s 4.1 percent jump. The sub-index closed at its highest level since July 2011 and capped the biggest two-day gain since Jan. 10.
Poly Real Estate, China’s second-largest developer by market value, added 2 percent to 13.10 yuan. Gemdale, the third largest, gained 1.9 percent to 6.52 yuan.
China Vanke Co. (000002), the biggest developer, was suspended from trading pending “important matters,” it said. The company plans to convert its Shenzhen-listed B shares traded in Hong Kong dollars to H shares and list in Hong Kong, the Securities Times reported, citing an unidentified company official.
Beijing Jingyuntong added 0.8 percent to 6.16 yuan. The company said LDK Solar was ordered to pay 293.7 million yuan for breach of contract by the Shanghai division of China International Economic and Trade Arbitration Commission.
SAIC slid 2.8 percent to 16.49 yuan, snapping six days of gains and having its biggest decline since Oct. 26. The 14-day relative strength measure for the stock, measuring how rapidly prices have advanced or dropped during a specified time period, was at 85.2 yesterday. Readings above 70 indicate a price may be poised to fall.
FAW Car Co. (000800), which makes cars in China with Volkswagen AG, tumbled 2.6 percent to 8.49 yuan. Great Wall Motor Co., China’s biggest pickup truck maker, lost 1.8 percent to 21.84 yuan.
Integrated Electronic Systems Lab Co. (002339), a maker of power automation systems, rose to a seven-week high after Shenyin & Wanguo Securities Co. initiated coverage of the company with an outperform rating. The stock gained 3.4 percent to 14.26 yuan, the highest close since Nov. 7.
The statistics bureau is scheduled to release November profit for industrial companies tomorrow. Net income surged 20.5 percent from a year earlier in October, according to the bureau.
--Zhang Shidong. Editors: Allen Wan, Shiyin Chen
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