China’s Stocks Rise as Shanghai Index Extends Rally on Sinopec

China’s benchmark stock index extended the biggest five-day rally in eight weeks as Chongqing Changan Automobile Co. led gains for consumer-discretionary shares and China Petroleum and Chemical Corp. rose. Banks fell.

Chongqing Changan Automobile soared 10 percent after saying its net income may have almost quadrupled. China Petroleum, known as Sinopec, surged 2.3 percent. China Citic Bank Corp. slid 2 percent after climbing 11 percent last week. Developer Suning Universal Co. fell the most in a month.

The Shanghai Composite Index advanced 0.1 percent to 2,131.54 at the close, after dropping as much as 0.7 percent earlier. The stocks gauge gained 3.5 percent last week after a deal to link Shanghai and Hong Kong markets that gives Chinese investors unprecedented access to investments such as Macau casino stocks and Tencent Holdings Ltd.

“Investors were excited about the China-Hong Kong deal last week but they cooled down over the weekend and noted the impact may not be that big,” said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. “Changan Auto’s earnings report is great so it’s boosting the stock price.”

The Hang Seng China Enterprises Index lost 0.2 percent. The CSI 300 Index retreated 0.1 percent to 2,268.61. The Bloomberg China-US Equity Index, a measure of the most-traded U.S.-listed Chinese companies, fell 1.2 percent on April 11.

Mutual Access

The Shanghai Composite has risen 0.7 percent in 2014 after last week’s rally wiped out this year’s losses. China said on April 10 it would allow a combined 23.5 billion yuan ($3.8 billion) of daily cross-border trading. The tie-up is part of efforts to free up capital flows in the world’s second-biggest economy, after the ruling Communist Party in November pledged the most sweeping package of reforms since at least the 1990s and in March widened the yuan’s trading band.

China Petroleum, Asia’s biggest refiner, extended its yearly gains to 21 percent and headed for its best annual performance since 2009. The valuation gap between A and H shares will narrow after the announcement of the Shanghai and Hong Kong exchanges link, Lu Wenjie, a strategist at UBS, said last week from Shanghai. The Hong Kong-listed shares, which trade at 8.9 times estimated profit in the city compared with 7.8 times in Shanghai, declined 0.8 percent.

Chongqing Changan jumped the most since October as the company said first-quarter net income may have risen to 2.05 billion yuan after the market closed on April 11. Great Wall Motor Co. advanced 4.4 percent.

Economic Outlook

China’s economy is growing at an acceptable pace, central bank Deputy Governor Yi Gang said, adding to signals policy makers will avoid broad stimulus to counter a slowdown.

“Economic growth is still within a reasonable range,” Yi said in an interview with Bloomberg News in Washington, responding to a question on whether he’s concerned that recent weakness in data points to a further slowdown in the world’s second-largest economy.

Economic data including new loans and money supply may be released as early as today. Indicators suggesting China’s economy expanded in the first quarter at the slowest pace since 2009 have spurred speculation the People’s Bank of China will cut banks’ reserve requirements for the first time in almost two years. PBOC Governor Zhou Xiaochuan said officials “don’t have to roll out significant policies” when the pace of economic expansion is within normal ranges.

Banks Decline

A gauge of financial companies in the CSI 300 slid 0.6 percent, the biggest loss among 10 industry groups. China Citic Bank dropped for the first time in six days, losing 2 percent in Shanghai. The stock advanced 0.4 percent in Hong Kong. Arbitrage may become a key driver for dual-listed Chinese banks following a tie-up between the Hong Kong and Shanghai stock exchanges, according to Bloomberg Industries.

China’s banking regulator ordered owners of the nation’s 68 trust companies to be prepared to provide funding or sell their stakes as the risk of defaults rises in the $1.9 trillion industry for high-yield investments.

The China Banking Regulatory Commission told trust companies to either restrict their businesses and reduce net assets or have shareholders replenish capital when they suffer losses, according to an April 8 notice seen by Bloomberg News.

The Shanghai Composite is valued at 7.9 times 12-month projected earnings, compared with the five-year average multiple of 12, data compiled by Bloomberg show. Trading volumes were 8 percent below the 30-day average.

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