China’s Stocks Rise Most in Week After Money Rates Fall

China’s stocks rose, erasing the benchmark index’s losses this month, as central bank measures to ease the nation’s cash squeeze boosted financial companies and raw-material producers. .

Ping An Bank Co. and Citic Securities Co. climbed at least 2 percent, driving the biggest gains for a measure of financial shares in a week. Aluminum Corp. of China Ltd., the biggest producer of the metal, rose 2 percent. Losses for Chengdu Dr Peng Telecom & Media Group Co. and Harbin Pharmaceutical Group Co. dragged down gauges of technology and drug companies.

The Shanghai Composite Index rose for the first time in five days, adding 0.7 percent to 1,990.06 at the close. The index has gained 0.6 percent this month after plunging 14 percent in June. Stocks rebounded as the central bank conducted reverse-repurchase operations for the first time in five months, said Zhang Gang, a strategist at Central China Securities Holdings Co. in Shanghai.

“The central bank is boosting liquidity in the market, especially during the end of the month when cash flow is tight,” Zhang said by phone.

The CSI 300 Index advanced 0.6 percent to 2,189.39, while the Hang Seng China Enterprises Index retreated less than 0.1 percent. The Bloomberg China-US Equity Index slid 1.3 percent yesterday.

Swap Rates

The Shanghai measure has fallen 12 percent this year and trades at 8 times 12-month projected profit, approaching the lowest level in at least five years, data compiled by Bloomberg show. Today’s trading volumes were 19 percent lower than the 30-day average, while 30-day volatility was at 26.9, near the highest level since December 2010, according to data compiled by Bloomberg.

The People’s Bank of China added 17 billion yuan ($2.8 billion) to the financial system today at a yield of 4.4 percent using seven-day reverse repos. That compares with 3.35 percent when the contracts were last used on Jan. 31 and a Feb. 7 auction of 14-day agreements at 3.45 percent, according to central bank data compiled by Bloomberg. Interest-rate swaps and money-market rates declined.

A gauge of financial companies in the CSI 300 comprising banks, insurers, brokerages and developers rose 1.5 percent, the most among the 10 industry groups. Ping An Bank gained 2.9 percent to 9.68 yuan. Citic Securities, the largest brokerage, surged 2 percent to 10.57 yuan. China Vanke Co., the biggest developer, advanced 1.2 percent to 9.26 yuan. Poly Real Estate Group Co. surged 1.9 percent to 9.87 yuan.

Cutting Overcapacity

A measure of material producers in the CSI 300 added 1.5 percent, the second most among the industry groups. Jiangxi Copper Co., the largest producer of the metal, jumped 1.4 percent to 15.51 yuan. Aluminum Corp. of China, known as Chalco, rose 2 percent to 3.12 yuan in Shanghai.

Mark Mobius, executive chairman of Templeton Emerging Markets Group, said Chalco is a “good long-term bet” as one of the few producers of the metal set to benefit from the government’s plans to reduce overcapacity. China ordered more than 1,400 companies in 19 industries including aluminum to ease oversupply, according to a July 25 statement from the Ministry of Industry and Information Technology.

Units of Franklin Resources Inc., Templeton’s parent company, have a combined stake of about 31 percent in Chalco, according to data compiled by Bloomberg.

A measure of technology companies slumped the most among industry groups in the CSI 300 today. Chengdu Dr Peng plunged 7.8 percent to 14.35 yuan, trimming this month’s gain to 36 percent.

Harbin Pharmaceutical Group Co. tumbled 6.2 percent to 5.75 yuan, dragging down a gauge of health-care companies. Drug stocks were still the best-performing industry group in July with a 11 percent gain, followed by telecommunication’s 9.5 percent advance and technology shares’ 8.4 percent increase.

-- Editors: Allen Wan, Richard Frost

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