China’s Stocks Rise Most in 2 Weeks After Inflation Slows

China’s stocks rose, driving the benchmark index to its biggest gain in two weeks, as slower-than-estimated inflation eased pressure on policy makers to tighten monetary policy.

Consumer-discretionary shares advanced the most among industry groups after SAIC Motor Corp., the biggest Chinese automaker, reported higher sales. TCL Corp., a television maker, advanced to the highest level in 21 months after the company estimated first-quarter profit may have jumped eightfold. Ping An Insurance (Group) Co. led gains for financial shares as the Shanghai Securities News said the insurer’s premium income rose.

The Shanghai Composite Index added 0.6 percent to 2,225.78 at the close, the most since March 20. The CSI 300 Index rose 0.7 percent to 2,489.43. The Hang Seng China Enterprises Index surged 2.2 percent. Consumer prices rose 2.1 percent in March, the National Bureau of Statistics said, compared with the 2.5 percent median estimate of 38 analysts surveyed by Bloomberg.

“CPI is lower than expected and stocks are recovering after a big decline yesterday as worries about the bird flu and property measures are being priced in,” Huang Cendong, an analyst at Tebon Securities Co., said in Shanghai. “Stocks are reaching a bottom and I would expect a proper rally soon.”

The Shanghai index has fallen 8.6 percent from a Feb. 6 high amid concern steps to cool property prices will drag on economic growth. Valuations have dropped to 9.1 times projected 12-month earnings, the lowest level since Dec. 13 and less than the seven-year average of 15.8, data compiled by Bloomberg show.

Inflation Data

Today’s economic report also showed producer prices fell 1.9 percent from a year earlier, the 13th straight decline, compared with the median estimate of a 1.9 percent drop in a Bloomberg survey of 32 economists. Food costs rose 2.7 percent in March from a year earlier, less than half of February’s 6 percent pace.

“Today’s reading will definitely help alleviate the inflation and monetary tightening concerns” that were triggered by the jump in February inflation, Bank of America Corp. economist Ting Lu wrote in a report today. He said the February inflation rate of 3.2 percent was distorted by the Lunar new year, while a government crackdown on excessive consumption was also helping to contain consumer-price gains.

Bloomberg surveys last month showed 14 of 33 analysts forecast an increase in the benchmark one-year lending rate this year, while two out of 22 respondents said the central bank would raise lenders’ reserve-requirement ratio.

Consumer Stocks

China is targeting inflation of about 3.5 percent this year, then-Premier Wen Jiabao said in his final annual report to the legislature on March 5, lowering the goal from last year’s 4 percent. Slowing price gains are a boost for Premier Li Keqiang as he seeks to sustain a rebound from the economy’s weakest annual expansion in 13 years. The economy will expand 8.2 percent this year and 8 percent in 2014, the Asian Development Bank said in a report today.

A gauge of consumer-discretionary companies in the CSI 300 rose 1.2 percent, the most among 10 industry groups. SAIC advanced 4.1 percent to 15.34 yuan after saying March vehicle sales rose 17.4 percent from a year earlier. TCL gained 2.6 percent to 2.72 yuan. The company said first-quarter profit may have risen between 670 percent and 710 percent from a year ago.

Ping An, the second-biggest insurer, rose 2.9 percent to 41.14 yuan. The company’s first-quarter premium income climbed 8 percent, the Shanghai Securities News reported, citing documents obtained from unidentified people. China Life Insurance Co., the largest insurer, added 1.8 percent to 17.46 yuan.

Trade Outlook

Trade data scheduled for tomorrow will probably show exports climbed 11.7 percent last month from a year ago. Exports rose 21.8 percent in February from a year ago, customs bureau data showed on March 8, beating the median estimate of 8.1 percent in a Bloomberg News survey.

China’s unprecedented run of better-than-forecast export growth has spurred deeper skepticism of the data at banks including Goldman Sachs Group Inc., casting doubt on the strength of the recovery.

Gains in overseas shipments exceeded forecasts by at least 7.5 percentage points in December, January and February, the first time that’s happened in three straight months in the eight years Bloomberg has compiled analyst estimates for the data.

The Shanghai Composite fell to the lowest level since Dec. 27 yesterday on concern the H7N9 bird flu outbreak will hurt the nation’s economic recovery. The death toll from the influenza rose to seven today, while the infection tally increased to 24.

Drugmakers Fall

Consumers should avoid markets where poultry is butchered as authorities increase monitoring for the new influenza strain, Feng Zijian, head of emergency response at the Chinese Center for Disease Control and Prevention, said in Beijing.

A gauge of health-care stocks in the CSI 300 fell 1.5 percent, the most among 10 industry groups. Hualan Biological slid 5.2 percent to 24.52 yuan. There is “no need to panic” over the bird flu as the World Health Organization has not found any evidence of virus transmission between humans as in the case of SARS, or severe acute respiratory syndrome, in 2003, Fortune CLSA Securities analysts wrote in a report today.

The Shanghai gauge’s trading volume was 22 percent lower than the 30-day average today, while 10-day volatility jumped to the highest level since January, according to data compiled by Bloomberg.

The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. rose 0.4 percent in New York, as solar manufacturers rallied on a report that billionaire Warren Buffett may be interested in buying Suntech Power Holdings Co. after the company was forced into bankruptcy.

Suntech jumped as much as 28 percent after a news service owned by Hong Kong Economic Times said Buffett’s MidAmerican Energy Holdings Co. may buy the solar panel maker, citing an unidentified person.

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