China’s Stocks Rise for Seventh Day, Led by Property Companies
China’s stocks rose for a seventh day after the nation’s biggest property developer reported a jump in sales and as investors bought shares of industrial companies that lagged behind during a bull-market rally.
China Vanke Co. gained 3.6 percent, helping to drive a gauge of real-estate stocks to the highest level since April 2010. China CNR Corp. and CSR Corp., the two biggest trainmakers, jumped by the daily maximum 10 percent limit. China Petroleum & Chemical Corp. (600028) dropped 2.1 percent after the refiner said it plans to sell shares in Hong Kong.
“It’s a bull market and buying is extending to all sectors,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages $120 million. “Railway and industrial stocks are moving because they are laggards during a recent market rally that’s mainly being driven by financials.”
The Shanghai Composite Index (SHCOMP) rose 0.2 percent to 2,433.13 at the close, the highest level since May 8. The index has risen 24 percent from a three-year low on Dec. 3, signaling a bull market to some investors, on signs economic growth is accelerating. The gauge is valued at 13.4 times reported profit, the highest level since September 2011, data compiled by Bloomberg show. That’s still lower than the measure’s seven-year average multiple of 21.4, the data show.
The CSI 300 Index (SHSZ300) added 0.9 percent to 2,771.68 today, while the Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong dropped 2.2 percent. Chinese companies traded on the mainland are priced at the biggest premium to Hong Kong-listed counterparts since Oct. 9, according to data compiled by Bloomberg. Mainland markets will be closed all of next week for the Lunar New Year holidays.
A measure of property stocks in the Shanghai Composite advanced 4.8 percent, the most among the five industry groups.
Vanke, the nation’s biggest listed property developer, gained 3.6 percent to 12.33 yuan after reporting January sales increased 36 percent from the previous month. Poly Real Estate, the second largest, rose 2.2 percent to 13.42 yuan. China Merchants Property Development Co. (000024), the third largest, climbed 3.6 percent to 28.45 yuan.
Investors expect developers to announce positive sales after Vanke reported a sales increase, said Dai Fang, an analyst at Zheshang Securities Co., in a phone interview today.
CSR, the nation’s biggest train maker, jumped 10 percent to 5.24 yuan. CNR, the second largest, surged 10 percent to 4.97 yuan. CSR had fallen 7.9 percent through yesterday over the past one month while CNR dropped 3 percent. The Shanghai Composite had advanced 6.6 percent in the same period.
The consumer-staples gauge in the CSI 300 surged 4.1 percent, the most among 10 industry groups. Consumer staples have been worst performer during the bull market for Chinese stocks with a gain of 7.9 percent through yesterday.
The Shanghai index’s bull-market rally has driven the gauge into a so-called golden cross, a chart pattern that has historically preceded gains in the subsequent month.
The Shanghai gauge’s 50-day moving average rose to 2,193.09 yesterday, above the 200-day mean of 2,191.08. A golden cross occurs when the shorter-term average rises above the longer one while both are increasing. On all five occasions that this phenomenon occurred since 1996, the measure climbed by an average 6.3 percent in the month that followed.
Trading volumes in the Shanghai Composite were 16 percent higher than the 30-day average, according to Bloomberg data. The 30-day volatility was 17.5, compared with 16.9 over the past year.
HSBC Holdings Plc and Markit Economics said today that its non-manufacturing Purchasing Managers’ Index for January climbed to 54 from the previous month’s reading of 51.7. The government’s services PMI climbed to 56.2 in January from 56.1 in December. A reading above 50 indicates expansion.
Sinopec slid 2.1 percent to 6.90 yuan. The shares plunged 6.4 percent in Hong Kong. The company plans to sell H shares at $8.45 apiece, a 9.5 percent discount to the level they closed at yesterday. The company -- which will use the cash for “general corporate purposes,” according to the filing -- may buy $8 billion of assets outside of China from its parent, the Wall Street Journal reported last month.
“Usually a discount is offered when the market is bad and this one is a bit too big given their share prices have posted quite some gains since September,” Michael Ding, lead manager of the China Region Fund at U.S. Global Investors Inc., which oversees $2.2 billion, said in a telephone interview from San Antonio, Texas. “It looks like they need funds for investment and working capital.”
China Life Insurance Co. (601628) led declines for insurers on concern about the industry’s premium income growth. China Life, the biggest insurer, slid 3.1 percent to 20.36 yuan. New China Life Insurance Co. lost 1.4 percent to 30.45 yuan. China Pacific Insurance (Group) Co. (601601) fell 2.4 percent to 22.14 yuan.
“Insurance companies’ January premium income growth may rise less than 10 percent from a year earlier and that’s lower than market expectations,” said Liu Jun, an insurance analyst at Changjiang Securities Co. in Wuhan. “That’s pressuring insurance stocks that have made decent gains recently.”
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