China’s Stocks Advance as Property Shares Rally on Vanke Profit
China’s stocks rose for a second day as property developers rallied after China Vanke Co. (000002)’s profit beat analyst estimates. A volatility gauge jumped before the release of a manufacturing report tomorrow.
Vanke advanced 4.2 percent after the biggest developer said net income climbed 30 percent last year. Sany Heavy Industry Co. led industrial companies to the biggest gain among 10 groups in the CSI 300 Index. (SHSZ300) Zijin Mining Group Co. (601899) paced losses for gold shares as bullion prices headed for a fifth month of declines.
“The foundation for the stocks rally, namely the economic recovery, is still there as people spend more on housing and cars to improve their lives,” said Dai Ming, a fund manager at Hengsheng Hongding Asset Management Co. in Shanghai, which manages $190 million. “We’ll have some corrections along the way given the index has had a very decent rally.”
The Shanghai Composite Index (SHCOMP) rose 0.6 percent to 2,327.43 at the 11:30 a.m. local-time break, paring this month’s losses to 2.4 percent, the first monthly drop since November. Still, the index has gained 19 percent since a bull-market rally started on Dec. 3. Thirty-day volatility was at 19.99 yesterday, the highest since Jan. 28. The measure trades for 9.6 times projected 12-month earnings, near the lowest since Dec. 24.
The CSI 300 Index gained 0.9 percent to 2,617.34, while the Hang Seng China Enterprises Index (HSCEI) advanced 1.9 percent. The Bloomberg China-US 55 Index (CH55BN) added 0.8 percent in New York yesterday, as U.S. housing data sent the Dow Jones Industrial Average to the highest level in five years.
The National Bureau of Statistics and China Federation of Logistics and Purchasing are scheduled to release a manufacturing index for this month tomorrow. The Purchasing Managers’ Index may climb to 50.5 from 50.4 a month earlier, according to the median estimate of 30 economists in a Bloomberg News survey. The number of 50 divides expansion and contraction. HSBC Holdings Plc’s PMI index is also due tomorrow.
HSBC released a preliminary reading of its PMI index on Feb. 25 that trailed economists’ estimates. Bank of America Corp.’s China economist Ting Lu said the manufacturing data was “heavily distorted” by the Chinese Lunar holiday this month.
A gauge of developers surged for a second day, gaining 2.5 percent. Vanke jumped 4.2 percent to 11.80 yuan after reporting net income climbed to 12.55 billion yuan ($2 billion) last year. That compares with the 11.95 billion yuan average profit estimate of 16 analysts surveyed by Bloomberg. Biggest rival Poly Real Estate Group Co. rose 3 percent to 12.75 yuan.
“We’re going to see earnings grow again after 18 to 24 months of flat earnings, which helps create tailwinds for Chinese stocks,” Eric Brock, who helps manage $3.8 billion as a portfolio manager at Clough Capital Partners, said by phone yesterday from Boston.
China will keep property curbs for a long time, Vanke’s President Yu Liang said yesterday. Chinese stocks have fallen this month on concern the government will announce more property restrictions to curb gains in housing prices and after the central bank took steps to reduce market liquidity.
Sany Heavy, the biggest maker of construction equipment, advanced for a second day, gaining 2.3 percent to 11.54 yuan.
The rally for China’s stocks since the end of last year hasn’t concluded because the economy will continue to recover and the government may introduce more projects to support growth, David Lai, portfolio manager at the Hong Kong unit of China Asset Management, said in a phone interview on Feb. 25.
China will open its annual National People’s Congress on March 5 to set this year’s growth target and discuss economic policies. The congress will also elect new government leaders.
Almost half of China’s provinces are setting their growth sights lower in the wake of the central government’s emphasis on the quality of expansion over speed, a sign of an increased focus on tackling rising debt. Fourteen provinces have set lower targets for gross domestic product expansion this year than in 2012 and the other 17 left their goals unchanged, according to Nomura Holdings Inc.
Zijin Mining, the biggest gold miner, slid 0.3 percent to 3.66 yuan. Shandong Gold Mining Co. declined 0.6 percent to 34.89 yuan.
Gold headed for a fifth monthly decline in the longest run of losses since 1997 as investors reduced holdings by more than 100 metric tons on concern that U.S. stimulus may be curtailed as the economy recovers.
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