China’s Stocks Rise Most in Week After Central Bank Adds Cash

China’s stocks rose, spurring the benchmark index’s biggest gains in a week, after the central bank eased the cash shortage in the financial system and phone-equipment maker ZTE Corp. returned to profit.

Shanghai Pudong Development Bank Co. climbed 1 percent after the People’s Bank of China expanded a lending facility to include smaller lenders. Haitong Securities Co. jumped the most in seven weeks on speculation initial public offerings will boost profits. Zhejiang Wolwo Bio-Pharmaceutical Co. soared in its debut in Shenzhen as seven out of eight companies that began trading today rallied 45 percent. ZTE, the second-biggest phone-equipment maker, rose the most in almost three weeks.

The Shanghai Composite Index climbed 0.9 percent to 2,008.31 at the close, while the Hang Seng China Enterprises Index surged 1.9 percent after closing at its lowest level since August yesterday. Money-market rates slid the most in four weeks as the central bank added more than 255 billion yuan ($42 billion) to the financial system and expanded a lending facility to meet Lunar New Year demand for cash.

“Stocks are up today because we had fallen considerably and the PBOC injected cash,” Zhang Haidong, an analyst at Tebon Securities Co., said in Shanghai. “The economy is still weak and there are so many IPOs waiting to list. We will have to wait until all the IPOs are done listing and the market has digested this before the market can improve, possibly in early February.”

Repo Rate

The CSI 300 Index added 1 percent to 2,187.41. Trading volumes in the Shanghai index were 23 percent below the 30-day average, according to data compiled by Bloomberg. The index trades at 7.5 times 12-month projected earnings, the lowest level since Bloomberg began compiling weekly data in 2005.

The Shanghai Composite slid below 2,000 for the first time since July 31 yesterday, as factory output and business spending slowed, concern grew that share sales will divert funds and rising demand for cash before the Lunar New Year drove the biggest jump in money-market rates in seven months. The stock gauge has fallen 5.1 percent this year.

The benchmark seven-day repurchase rate, a gauge of interbank funding availability, slumped 105 basis points to 5.55 percent as of 3:27 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It surged 142 basis points yesterday, the most in seven months.

IPO Shares

The PBOC supplied money to the largest banks using its Standing Lending Facility and will auction reverse-repurchase agreements today. Small- and medium-sized banks in 10 regions will be able to tap the SLF for loans of up to two weeks on a trial basis.

A gauge of financial companies in the CSI 300 rose 1.1 percen, the biggest gain since Dec. 31. Shanghai Pudong climbed 1 percent to 9.16 yuan. China Citic Bank Corp. added 0.8 percent to 3.62 yuan. Haitong Securities, the second-biggest listed brokerage, rose 2.5 percent to 10.44 yuan. Founder Securities Co. jumped 4.7 percent to 5.58 yuan.

Fifty-two companies have been approved by the securities regulator to sell shares after the end of a year-long IPO freeze. Of the eight companies trading on the Shenzhen Stock Exchange today, three are on the small and medium enterprise board and five are on the ChiNext index. The eight include Zhejiang Wolwo, Chengdu Tianbao Heavy Industry Co. and Shanghai Liangxin Electrical Co.

Investors Habit

Zhejiang Wolwo gained 45 percent to 29.15 yuan. Chengdu Tianbao jumped 45 percent to 17.42 yuan. Shanghai Liangxin climbed 45 percent to 27.79 yuan. The three were suspended twice during trading hours after reaching price limits.

The Shenzhen Stock Exchange will prevent “excessive” speculation in new shares and fight against market manipulation, the Shanghai Securities News reported today.

“It’s hard to change Chinese investors’ habit of speculatively trading in new shares,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Unless there’s an example of a debut company falling below its offer price, the practice won’t be stopped.”

ZTE surged 4.3 percent to 12.78 yuan. The company estimated net income last year was between 1.2 billion yuan and 1.5 billion yuan, compared with a loss of 2.84 billion yuan in 2012.

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