China’s Stocks Rise for Second Day, Led by Developers

China’s stocks posted the biggest two-day gain in seven weeks as the nation’s economic prospects spurred fund inflows. ZTE Corp. led a rally for phone companies, while property developers and technology shares advanced.

China Vanke Co. led a two-day gain for real-estate companies after an industry gauge plunged the most in almost five years on March 4. ZTE, a phone-equipment maker, jumped 10 percent after a report on approval for fourth-generation service spurred speculation carriers will boost spending. Chinese money-market rates slid and the yuan climbed near a 19-year high after data showed local banks bought a record net amount of foreign currencies in January, an indication of larger inflows.

The Shanghai Composite Index rose 0.9 percent to 2,347.18 at the close. The gauge gained 2.3 percent yesterday as the government announced higher fiscal spending targets during the first day of the National People’s Congress. The CSI 300 Index added 1 percent to 2,650.20. The Hang Seng China Enterprises Index climbed 1.8 percent.

“Investors may have expectations for some reforms after the NPC,” Liu Guangming, an analyst at Dongxing Securities Co., said today from Beijing. “For now the economy is quite stable, at least in the first half.”

The Shanghai gauge is up 3.4 percent this year and trades for 9.7 times projected 12-month earnings, compared with the MSCI Emerging-Market Index’s 10.3 times, according to data compiled by Bloomberg. show. Trading volumes were 10 percent above the 30-day average, data show.

The government announced yesterday it would keep its economic growth target of 7.5 percent unchanged from 2012 while projecting a 10 percent jump in fiscal spending to fund areas such as health care. The economy expanded 7.8 percent last year, the weakest pace since 1999.

Fund Flows

The benchmark money rate touched a one-week low today after data published by the People’s Bank of China showed local banks bought a net 684 billion yuan ($110 billion) of foreign currencies in January, an indication of larger inflows. The yuan rose to within 0.1 percent of a 19-year high.

“The surge in forex purchases is due largely to a pent-up demand for renminbi with a rebound of confidence in renminbi and the Chinese economy,” Ting Lu, China economist at Bank of America Corp., wrote in a note today.

Shanghai’s property gauge rose 1 percent, gaining for a second day after plunging 9.3 percent on March 4 on property curbs including a 20 percent tax on profits from sales. Vanke, the biggest developer, gained 2.4 percent to 11.15 yuan, while rival Poly Real Estate Group Co. rose 0.9 percent to 11.35 yuan.

“Property shares are cheap now after slumping heavily,” says Tang Yonggang, analyst at Hongyuan Securities Co. in Beijing. The Shanghai property measure trades at 9.89 times reported profit, compared with a five-year average of 18.7 times, according to data compiled by Bloomberg.

Money Supply

People’s Bank of China Governor Zhou Xiaochuan said yesterday at the NPC that China’s target for 13 percent M2 growth this year means authorities don’t want money supply to grow too quickly. That compares with last year’s increase of 13.8 percent.

ZTE, the second-largest maker of telephone equipment, jumped 10 percent to 10.86 yuan in Shenzhen and 8.3 percent to HK$14.06 in Hong Kong. The company said it’s collaborating with Intel Corp. on next-generation smartphones.

China may issue licenses for fourth-generation wireless service this year with the exact timing to be determined by the expansion of a trial being conducted by China Mobile Communications Corp., China Securities Journal reported today, citing Minister of Industry and Information Technology Miao Wei.

Telecom, Technology

Goertek Inc., a supplier to Apple Inc., led a rally for technology companies, rising 6.2 percent to 44.50 yuan. Gains for Chinese technology stocks has been spurred by touch-notebook growth prospects this year, Capital Securities analyst Chen Qi said yesterday.

The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., advanced 0.8 percent yesterday. The Bloomberg China-US 55 Index rose 1.2 percent in New York, with Inc., owner of China’s second-largest online video website, soaring 12 percent after the South China Morning Post reported Sohu is talking to investment banks about taking the company private.

Sohu said today it isn’t talking to investment banks and private equity funds about a possible plan to take the company private or delist its common stock from the Nasdaq.

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