China’s Stocks Rise, Led by Health-Care, Financial Companies

China’s stocks rose, led by health-care and financial companies, amid signs of an economic recovery in the world’s second-largest economy.

Beijing Tiantan Biological Products paced gains for health-care companies, jumping 10 percent as the government said it’s targeting average annual output growth of more than 20 percent for the biomedical industry. Shanghai Pudong Development Bank Co. surged to an 7-month high after estimating a 25 percent jump in 2012 net income. GoerTek Inc., a supplier to Apple Inc., dropped 4.8 percent, dragging down technology shares.

The CSI 300 Index gained 0.2 percent to 2,530.14 at 1:17 p.m., after rising as much as 0.9 percent and entering a bull market. The Shanghai Composite Index advanced 0.2 percent to 2,281.62 and has rallied 16 percent since hitting a near four-year low on Dec. 3. A gain of 20 percent or more signals a bull market to some investors.

“The rally momentum hasn’t ended,” said Zhang Gang, a strategist at Central China Securities Holdings Co. in Shanghai. “Expectations for policy measures aren’t completely priced in. Investors are still waiting for the new government to act with policy initiatives and there are a lot of expectations. Economic data are also showing steady gains.”

The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong added less than 0.1 percent today. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, gained 0.4 percent in New York on Dec. 4. Chinese stocks have rallied in the past month on speculation increased spending on infrastructure will spur a rebound in the economy from a seven-quarter slowdown.

Banks Rally

The nation’s gross domestic product probably expanded 7.8 percent in the fourth quarter from a year earlier, from a three-year low of 7.4 percent in the previous three months, according to the median estimate of 34 economists surveyed by Bloomberg last month. The GDP data are scheduled to be released Jan. 18.

Shanghai Pudong Development Bank climbed 2.2 percent to 10.24 yuan. Its 2012 net imcome may be 34.2 billion yuan ($5.49 billion), according to statement to the Shanghai Stock Exchange. Industrial Bank Co. jumped 4.1 percent to 17.47 yuan. China Minsheng Banking Corp. surged 2.5 percent to 8.18 yuan.

Pudong Bank’s better-than-expected 25 percent profit growth “raises the curtain” for Chinese banks’ earnings reports, Ping An Securities said in a note today. “We expect more banks to post results that beat market expectations and dismiss concerns on profit growth and asset quality. Banking valuations will be repaired as fundamentals improve,” Ping An said.

Urban Development

The CSI 300’s last bull-market rally began in July 2010 and lasted until November that year with the stock gauge jumping 41 percent. The index entered a bear market in August 2011 as the government raised interest rates and ordered banks to set aside more funds as deposit reserves to cool inflation.

The Shanghai index posted its largest monthly gain since July 2009 last month after the government said it would spend more on urban development to drive economic growth.

Policy makers will support the development of environmentally friendly urban transport systems and offer tax breaks and fuel subsidies for mass transit vehicles, according to a statement by the State Council on Jan. 5.

Li Keqiang, No 2 in the ruling Communist Party’s hierarchy, is championing urbanization as a new growth engine that will boost incomes and consumption. The focus on improving public transport comes as the government faces growing discontent over pollution that’s caused partly by surging car ownership.

SOE Reform

A gauge of health-care stocks in the CSI 300 rose 1.1 percent, the most among 10 industry groups. Beijing Tiantan Biological Products surged 10 percent to 13.41 yuan. Hualan Biological Engineering Inc. jumped 7.7 percent to 22.13 yuan. China’s target for the biomedical industry is for 2013 to 2015, according to a State Council statement posted on the central government’s website on Jan. 6.

Trading volumes in the Shanghai Composite were 33 percent higher than the 30-day average, according to data compiled by Bloomberg. The index trades at 9.9 times estimated earnings, compared with the five-year average of 15.3, according to weekly Bloomberg data.

The biggest monthly gain for Chinese stocks in two years is poised to falter should the nation’s new leaders fail to push ahead with reform of state-owned companies, according to the Shanghai government’s investment arm.

The new generation of Communist Party leaders headed by Xi Jinping needs to break the monopoly of government enterprises by introducing more competition and to ease financing for smaller companies to keep economic growth at about 7 percent to 8 percent over the next 10 years, Pang Yang, chief executive officer with the financial-service advisory unit of Shanghai Alliance Investment Ltd., said in an interview at a Bloomberg hedge-fund forum in Shanghai on Jan. 5.

GoerTek dropped 4.8 percent to 34.90 yuan. A gauge of technology shares in the CSI 300 trades at 22 times reported earnings, compared with 12.7 for the broader index.

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