Shanghai Composite Index Rises, Capping Weekly Advance

China’s benchmark stock index advanced, capping its first weekly gain since May, as rallies in property firms and material producers overshadowed losses in energy shares and drugmakers.

China Vanke Co. climbed 4.1 percent after the developer’s sales increased last month. Zijin Mining Co., the nation’s largest gold producer by value, jumped the most since January 2012 after reaching an almost five-year low last week. Guanghui Energy Co. and Tasly Pharmaceutical Group Co. dropped at least 2.1 percent. The benchmark money-market rate fell for a second week on speculation the central bank injected funds into select banks to ease a cash shortage.

The Shanghai Composite Index added 0.1 percent to 2,007.20 at the close, as 488 stocks dropped and 406 rose. Trading volumes were 8 percent lower than the 30-day average. The gauge rose 1.4 percent this week. The CSI 300 Index gained 0.2 percent to 2,226.85, while the Hang Seng China Enterprises Index jumped 1.7 percent in Hong Kong.

“Concerns about the cash crunch have basically eased and that has provided some relief to the market,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages $120 million. “Upcoming economic data won’t look good but most negative factors seem to have been priced in. The market may be range-bound at this level.”

The Shanghai Composite has fallen 12 percent this year, as data from industrial production to exports pointed to a sustained slowdown in the economy and money-market rates reached record highs. The index trades at 8.2 times 12-month projected profit, after reaching the cheapest level in at least five years last week, data compiled by Bloomberg show.

Analyst Ratings

UBS AG lowered its rating on Chinese stocks to neutral in a report today, citing the risk of further declines caused by tighter liquidity. In a separate report, HSBC Holdings Plc reduced its recommendation on the nation’s shares to underweight from overweight as economic growth slows and the government places more emphasis on reform.

The statistics bureau is scheduled to release June data on inflation on July 9. Consumer prices probably rose 2.5 percent last month, compared with a 2.1 percent gain in May, according to the median estimate of 29 economists in a Bloomberg survey. Declines in producer prices probably narrowed to 2.5 percent from 2.9 percent, according to the survey.

Developers Advance

A gauge of property stocks on the Shanghai index climbed 1.4 percent, paring its 2013 loss to 15 percent.

Vanke, the nation’s biggest listed property developer, advanced 4.1 percent to 10.20 yuan after saying sales last month rose to 13.5 billion yuan ($2.2 billion) from 13.3 billion yuan a year earlier. Poly Real Estate Group Co., the second largest, surged 4.7 percent to 10.41 yuan.

China’s seven-day repurchase rate, which measures interbank funding availability, dropped 15 basis points to 3.80 percent today, according to a weighted average compiled by the National Interbank Funding Center. The benchmark reached a record high of 12.45 percent on June 20.

The State Council reiterated it will follow a “prudent” monetary policy stance, in a seven-page statement released in Beijing today after the market closed.

A measure of materials producers in the CSI 300 rose 1.1 percent, capping the biggest two-day gain since Jan. 15 and paring its 2013 decline to 28 percent. Zijin Mining rallied 9.9 percent to 2.67 yuan. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., China’s biggest producer of rare earth, added 4.2 percent to 22.29 yuan.

Temasek Comments

Energy and health-care stocks fell. Guanghui Energy sank 5.1 percent to 11.76 yuan in a fourth day of losses. Tasly Pharmaceutical slid 2.1 percent to 43.08 yuan. The stock has jumped 56 percent this year.

Temasek Holdings Pte, the biggest foreign investor in Chinese banks, said it’s not concerned by a cash crunch that sent stocks plunging last month and plans to increase its assets in the nation.

“There is sufficient liquidity in the system over a prolonged period,” Chia Song Hwee, head of the investment group, said at a briefing in Singapore yesterday. “We’re actually looking at it as an opportunity to build on the portfolio rather than shrinking it.”

— With assistance by Shidong Zhang

Before it's here, it's on the Bloomberg Terminal.