China’s Stocks Post Longest Monthly Winning Streak Since 2009

China’s stocks rose, capping the benchmark gauge’s longest stretch of monthly gains since 2009, amid speculation the government is accelerating market reforms and restructuring of state-owned companies.

Huaneng Power International Inc. climbed to the highest level in three months months as Citic Securities Co. said reform expectations will boost power producers in the medium term. Bank of Ningbo Co. and Bank of Nanjing Co. led gains for lenders, jumping more than 8 percent. Baoshan Iron & Steel Co. advanced to a one-month high after recording its biggest profit in five quarters. China Railway Group Ltd. fell 1.4 percent, paring this week’s rally to 30 percent.

The Shanghai Composite Index rose 1.2 percent to 2,420.18 at the close. The benchmark measure climbed 2.4 percent this month to a 20-month high as President Xi Jinping’s government pressed state-owned companies to reform prices to reflect market conditions, and as funds flowed into Chinese equities in anticipation over the start of an exchange link with Hong Kong.

“Investors are bullish,” said Zhou Lin, an analyst at Huatai Securities Co. in Nanjing. “Investors expect more reforms and the release of more liquidity by the government. The upward trend will spill over into next year.”

Hong Kong’s Hang Seng China Enterprises Index climbed 1.2 percent, extending gains this month to 4.3 percent. The Hang Seng Index rose 1.3 percent today, while the CSI 300 Index advanced 1.6 percent to the highest level since June 2013. The Bloomberg China-US Equity Index added 0.3 percent yesterday.

Banks Rally

The Shanghai index’s trading volumes jumped 63 percent above the 30-day average for this time of day, according to data compiled by Bloomberg. It’s valued at 8.8 times 12-month projected earnings, compared with the five-year average of 10.7. The H-shares gauge has a multiple of 6.8.

A gauge of financial shares in the CSI 300 jumped 3.2 percent for the steepest gain among 10 industry groups. Bank of Ningbo climbed 8.6 percent. Bank of Nanjing surged 9.5 percent. China International Capital Corp.’s banking analyst Anson Huang forecast gains of at least 30 percent for leading banks in a report today, spurred by easing monetary policies and the start of the exchange link between Shanghai and Hong Kong.

The People’s Bank of China may clarify stimulus measures and the status of the economy when it releases its third-quarter monetary policy report, possibly as early as today, according to analysts. The report may give confirmation the central bank provided 500 billion yuan to the five biggest banks in September, they said. Another likely injection of 200 billion yuan into some national and regional lenders this month will probably not be confirmed until the next report.

Manufacturing Data

Preparations for the start of the bourse link between Shanghai and Hong Kong are in the final stage, the Shanghai Securities News cited Yao Gang, the vice chairman of the CSRC, as saying yesterday without providing any details.

Material stocks rallied ahead of tomorrow’s manufacturing report. Jiangxi Copper Co., the nation’s biggest producer of the metal, climbed 1.6 percent in Hong Kong for a four-day, 8.7 percent rally. Baoshan Steel jumped 2.1 percent in Shanghai after it said net income climbed to 1.86 billion yuan in the third quarter from 938.7 million yuan a year earlier.

The Purchasing Managers’ Index from the National Bureau of Statistics and China Federation of Logistics and Purchasing probably climbed to 51.2 in October, up from 51.1 in September. A similar gauge from HSBC Holdings Plc and Markit Economics was 50.4, exceeding the median estimate of 50.2 and September’s final reading. Readings above 50 signal expansion.

Utilities Rally

A gauge of utility companies gained 5.1 percent this month, the most among industry groups, led by a 15 percent rally for GD Power Development Co.

Valuations of power stocks will expand as capital costs fall and capital flows into the sector on the Shanghai-Hong Kong exchange link, Citic Securities Co. analysts led by Wu Fei wrote in a report today. The nation’s leading economic planner held a power reform conference this week to seek expert comments on making prices more market oriented, the Shanghai Securities News reported.

A sub-index of industrial companies in the CSI 300 rose 3.9 percent this month for the third-biggest gain. China CNR Corp. jumped 23 percent, while CSR Corp. climbed 11 percent. The two listed trainmakers may soon announce details of a merger plan, Caixin reported yesterday. Both companies were suspended from trade this week.

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