Chinese Stocks Gain to Cap Best Pre-Holiday Advance Since 2007

Chinese stocks rose, paced by consumer-discretionary stocks, as the benchmark gauge completed its best seven-day gain before the Lunar New Year holiday since 2007.

BYD Co., the battery maker backed by Warren Buffett’s Berkshire Hathaway Inc., climbed by the 10 percent daily limit after reports Apple Inc. is working on an electric vehicle. China Eastern Airlines Corp. jumped 10 percent on expected demand for flights during the holidays. Poly Real Estate Group Co. added 1.3 percent after the nation’s new home prices for January fell in 64 cities, versus 65 in December.

The Shanghai Composite Index climbed 0.8 percent to 3,246.91 at the close, taking gains over the seven days to 5.6 percent. Trading volumes were 24 percent below the 30-day average before the weeklong holiday begins on Wednesday. The gauge has rallied 52 percent during the past 12 months, the most among major benchmark indexes tracked by Bloomberg, amid speculation that monetary stimulus will revive growth in the world’s second-largest economy.

“The rally in the stock market is clearly a good sign for spending during the holiday,” said Zhang Dongyi, Guangzhou-based fund manager at Guangfa Fund Management Co. “We are optimistic about further performance in banks, real estate and insurance companies that could benefit from measures to support the economy.”

National Congress

The People’s Bank of China pumped a net 205 billion yuan ($32.8 billion) into the banking system last week, the most since January 2014. That followed an across-the-board reduction in banks’ reserve requirements on Feb. 6 and the nation’s interest-rate cut in November. China will hold its National People’s Congress in the first two weeks of March, when the government sets its growth target for the year.

The CSI 300 Index rose 0.7 percent on Tuesday. Hong Kong’s Hang Seng China Enterprises Index added 0.5 percent, while the Hang Seng Index gained 0.3 percent. The Bloomberg China-US Equity Index, the measure of the most-traded U.S.-listed Chinese companies, added 1.3 percent in New York on Feb. 13, with U.S. financial markets closed on Monday for a holiday.

A gauge of property companies in Shanghai rose for a seventh day, with Poly Real Estate advancing for a second day in three. Ganzhou joined Shenzhen in posting an increase in new home prices in January from a month earlier, according to data from the National Bureau of Statistics on Tuesday.

“Investors including myself are cautiously optimistic as there’s a deflationary risk in China and the PBOC is trying to improve the situation,” said Stephen Ma, Hong Kong-based head of greater China equities at LGM Investments. “We like selective sectors like uncrowded automobiles and high quality insurance names as a proxy to the rising stock market.”

Holiday Spending

China Life Insurance Co. added 1.1 percent, sending a gauge of financials 0.8 percent higher.

China Eastern climbed to the highest level since Jan. 26 and China Southern Airlines Co. rallied 7.4 percent. Lunar New Year tourism sales may rise 13 percent compared with a year earlier, the Economic Information Daily reported.

About 2.8 billion trips will be made in China during the festival, according to government estimates. Spending at retail and restaurants in the holiday week in China last year totaled 610.7 billion yuan, or almost $100 billion.

The Shanghai index is valued at 12.2 times 12-month projected earnings, compared with the five-year average of 10.3, according to data compiled by Bloomberg.

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