China’s Stocks Rise for First Time in Week on Developers, MoutaiWeiyi Lim
China’s stocks rose for the first time in five days as Poly Real Estate Group Co. led a rally for property developers after reporting higher profit. Consumer-staples producers and phone companies also climbed.
Poly Real Estate, the second-biggest developer, advanced 1.2 percent after its 2013 net income jumped to 10.7 billion yuan ($1.73 billion) from 8.44 billion yuan. Kweichow Moutai Co. led an advance for consumer-staples shares with a 5 percent gain. ZTE Corp. climbed 4 percent. Bright Dairy & Food Co. plunged 3.4 percent after its profit trailed estimates.
The Shanghai Composite Index added 0.7 percent to 2,047.46 at the close, while the Hang Seng China Enterprises Index slipped 0.1 percent, halting a four-day rally. Chinese manufacturing indexes pointed to weakness in the world’s second-biggest economy as leaders contemplate whether to add stimulus.
“The official PMI was within expectations and HSBC PMI was weaker but not that much of a surprise, so we are not slumping,” said Zeng Xianzhao, an analyst at Everbright Securities Co. “Investors are waiting for stimulus measures from the government.”
The official Purchasing Managers’ Index rose to 50.3, compared with the 50.1 median estimate of 35 analysts in a Bloomberg News survey. HSBC Holdings Plc and Markit Economics’ PMI fell to 48 March from 48.5 in February. Numbers above 50 signal expansion.
Premier Li Keqiang is under pressure to take steps to address weakening economic expansion amid deepening concern that the nation will miss its 7.5 percent growth target this year, the weakest annual pace since 1990. The median estimate for first-quarter expansion dropped to 7.4 percent in March from 7.6 percent in February, according to Bloomberg surveys of analysts. For the full year, the median forecast slid to 7.4 percent.
The Shanghai Composite has fallen 3.2 percent this year, dragging down valuations to 7.5 times estimated profit, compared with the five-year average of 12. Besides concerns about slowing economic growth, Chinese stocks have declined this year amid speculation there will be more corporate defaults after a private developer collapsed and the resumption of new share sales will divert funds.
The CSI 300 Index rose 0.8 percent to 2,163.12 today. Trading volumes in the Shanghai measure were 26 percent below the 30-day average, Bloomberg data showed. The Bloomberg Index of the most-traded Chinese stocks in the U.S. gained for a third day yesterday, trimming its quarterly decline to 6.5 percent.
A measure of consumer staples in the CSI 300 rose 2.2 percent, the most among 10 industry groups. Kweichow Moutai, the largest producer of baijiu liquor, surged 5 percent to 162.49 yuan. Its rival Wuliangye Yibin Co. rallied 3.4 percent to 17.23 yuan. Bright Dairy plunged 3.4 percent to 16.19 yuan after it reported a full-year profit of 406 million yuan, compared with the average analyst estimate of 469.1 million yuan.
Poly Real Estate advanced 1.2 percent to 7.70 yuan. ZTE climbed 4 percent to 13.14 yuan.
China’s most beaten-down stocks have turned into the biggest winners from government efforts to bolster confidence in the slumping economy.
Shares in the MSCI China Index with the most depressed valuations, steepest five-year losses and highest short interest have all outpaced the gauge’s 6 percent rally from an eight-month low on March 20, according to data compiled by Bloomberg.
Companies tied to infrastructure and property, among the biggest victims of weaker growth in the world’s second-biggest economy, rallied after policy makers accelerated construction projects and eased funding restrictions for financial companies. More pro-growth measures would have to be unveiled to extend the rebound, according to Zheshang Securities Co. and Societe Generale SA’s private bank.
“The ones with the worst fundamentals will rise the fastest because traders are coming in to punt the stocks,” said David Poh, the regional head of portfolio-management solutions at the private-banking unit of Societe Generale, which had about $116 billion under management as of December. “Everyone is trying to play the fact they are going to reform and do a bit more to stimulate the economy.”