China’s Stocks Rebound From Steepest Weekly Decline in 20 Months

China’s stocks rebounded from the biggest weekly drop in 20 months as oil refiners and brokerages rose on improving earnings prospects, overshadowing a private report showing the nation’s manufacturing may slow this month.

China Petroleum & Chemical Corp., also known as Sinopec, rallied 2.7 percent after the government allowed refiners to raise fuel prices for the first time since September. Citic Securities Co. paced gains for brokerages as the Shanghai Securities News reported regulators will expand short-selling. China Vanke Co. and Poly Real Estate Group Co. slid more than 2 percent after the China Securities Journal reported detailed rules to rein in the property market may be released soon.

The Shanghai Composite Index rose 0.5 percent to 2,325.82 at the close, paring a gain of as much as 1.1 percent after a preliminary manufacturing report from HSBC Holdings Plc trailed economists’ estimates. The gauge dropped 4.9 percent last week. The CSI 300 Index added 0.3 percent to 2,604.96 today.

“Today’s gain is a technical rebound, helped by a couple of large-caps such as Sinopec, which has risen because the increase in fuel prices exceeds expectations,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “The PMI data show the economic recovery is weak.”

The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong gained 0.2 percent. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 1 percent on Feb. 22 in New York.

Gasoline Prices

The Shanghai Composite has fallen 4.5 percent after gaining as much as 24 percent during a bull-market rally that started on Dec. 3. The measure’s valuation of 9.66 times projected 12-month earnings is near the lowest in a month. The index is still up 2.5 percent this year.

The preliminary reading of a Purchasing Managers’ Index was 50.4 in February, according to a statement from HSBC and Markit Economics. That compares with the 52.3 final reading for January and the 52.2 median estimate of 11 analysts surveyed by Bloomberg News. A number above 50 indicates expansion.

Chinese stocks may continue to fall in March because the current economic recovery isn’t strong and investment growth may decelerate, analysts led by Mao Changqing at Citic Securities wrote in a report today.

Sinopec, the nation’s biggest refiner, rose 2.7 percent to 7.17 yuan. The stock was the biggest contributor to the Shanghai Composite’s gains, according to data compiled by Bloomberg.

Gasoline will increase by 300 yuan ($48) a metric ton and diesel by 290 yuan a ton effective today, the National Development and Reform Commission said in a statement on its website yesterday.

Borrowing Shares

Citic Securities, China’s biggest listed brokerage, added 1 percent to 13.84 yuan. Haitong Securities Co., the second largest, rose 1 percent to 11.61 yuan. GF Securities Co. advanced 1.5 percent to 15.12 yuan.

Eleven brokerages including Citic, Haitong and GF will be able to borrow shares in a pre-approved pool of 90 publicly traded companies, the Shanghai Securities News reported over the weekend, citing China Securities Finance Corp. The state-owned agency was set up to provide securities firms with funds and stock for short-selling and margin trading.

There are expectations brokerages will continue to expand and earnings are likely to rise this year from last year on increased transactions, said Song Jian, an analyst at China Minzu Securities Co., by phone today from Beijing.

Property Stocks

The China Securities Regulatory Commission will release revised rules on its Renminbi qualified foreign institutional investor trial soon, the China Securities Journal reported today, citing the regulator. The RQFII program allows offshore yuan in Hong Kong to be invested in mainland’s stocks and bonds.

Trading volumes in the Shanghai Composite were 32 percent lower than the 30-day average today, according to Bloomberg data. Thirty-day volatility in the gauge was at 19.4, close to the highest since Jan. 28.

A measure of property stocks fell 0.6 percent, the lowest close since Dec. 27. Vanke, the nation’s biggest property developer, declined 2.7 percent to 11.01 yuan. Poly Real Estate, the second largest, lost 2.1 percent to 12.14 yuan. China Merchants Property Development Co., the third largest, slipped 0.9 percent to 25.90 yuan.

Some ministries and local governments may announce detailed rules to control the property market soon, the China Securities Journal reported today, citing an unidentified person. Some of the measures will likely be announced before the National People’s Congress and the Chinese People’s Political Consultative Conference, according to the report. The CPPCC meeting will start on March 3 and the NPC will begin on March 5.

Kweichow Moutai Co. and Wuliangye Yibin Co. led a retreat for consumer-staples stocks after they were fined 449 million yuan in total by local governments for setting minimum retail prices. Moutai, which makes baijiu liquor, slid 2.4 percent to 181.09 yuan. Wuliangye lost 2.3 percent to 25.19 yuan.