China Stocks Eke Out Gain for Longest Winning Streak in 23 Years

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Chinese stocks eked out their longest winning streak in 23 years, with turnover climbing to a record amid volatile trading, as investors bet weaker-than-estimated manufacturing data will spur further monetary stimulus.

Technology and material companies led gains as Yonyou Network Technology Co. jumped 10 percent and Zijin Mining Group Co. surged by the daily limit. Energy companies slumped, with coal producer China Shenhua Energy Co. losing 1.7 percent after the preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics fell to an 11-month low.

The Shanghai Composite Index added 0.1 percent to 3,691.41 at the close, erasing a loss of as much as 2.4 percent. The gauge has risen 12 percent during the 10-day rally, the longest winning streak since May 1992. Combined turnover on the Shanghai and Shenzhen stock exchanges jumped to an all-time high, while new account openings surged to a record 1.14 million last week, according to data released today.

“China is in the process of adjusting the structure of the economy so the market can tolerate slower growth,” said Wu Kan, a fund manager at Dragon Life Insurance Co. in Shanghai. “We are in the bull market and any correction will be short.”

The CSI 300 Index added less than 0.1 percent. Hong Kong’s Hang Seng China Enterprises Index slid 1.4 percent and the Hang Seng Index retreated 0.4 percent.

The Shanghai Composite has gained 14 percent this year, extending last year’s 53 percent advance, amid speculation the government will add to two cuts in interest rates and one reduction in lenders’ reserve-requirement ratios since November to shore up growth in the world’s second-largest economy.

Rate Outlook

The preliminary manufacturing index fell to 49.2 this month, HSBC and Markit Economics said Tuesday. That missed the median estimate of 50.5 in a Bloomberg survey and down from February’s 50.7. Numbers below 50 indicate contraction.

Bloomberg’s gross domestic product tracker, which draws on measures such as electricity production, shows the pace of economic growth slowed to 6.28 percent in February.

“Given recent growth momentum and liquidity dynamics, we expect the next RRR cut may come as soon as April,” JPMorgan Chase & Co. China economist Haibin Zhu wrote in a note.

Nine stocks fell for every five that gained on the Shanghai index on Tuesday. Gauges of financial and energy stocks in the CSI 300 dropped the most among 10 industry groups, losing 1.5 percent and 1.2 percent respectively. Shenwan Hongyuan Group Co. slid 3.4 percent while Poly Real Estate Group Co., China’s second-largest developer by market value, declined 3.4 percent. PetroChina Co. slumped 1.8 percent.

Technical Signals

Measures of technology and material shares in the CSI 300 climbed at least 1.9 percent. Software company Neusoft Corp. surged 10 percent. Zijin Mining rose to the highest level since May 2012 after agreeing to buy a 9.9 percent stake in Ivanhoe Mines Ltd.

Technical indicators signal the rally in Chinese stocks may be due to pause, while Bank of America Corp. advised investors to take profits in state-owned enterprises.

The Shanghai Composite’s 14-day relative strength index, showing how rapidly prices have advanced or dropped during a specified time period, was at 79.4 Tuesday, its highest level in three months. Readings above 70 indicate a price may be poised to fall. Bank of America cut its recommendation on Chinese stocks Monday to neutral from overweight in a note, saying the market was in a state of “euphoria.’

‘‘We are now concerned that the scale of monetary/fiscal easing required in China is so large, and so radically different from where policy makers’ assessments are, that an overweight is no longer tenable,” Bank of America analyst Ajay Singh Kapur wrote in the report.

Record Turnover

Combined trading values on the Shanghai and Shenzhen bourses increased to 1.42 trillion yuan ($228.7 billion) Tuesday, surpassing the previous all-time high on Dec. 9. New stock account openings increased 58 percent in the week to March 20, according to data from the China Securities Depository and Clearing. The previous record of 1.07 million was set in the week ended Sept. 7, 2007.

The daily available quota for Shanghai shares through the exchange link reached 14.55 billion yuan, above the starting limit of 13 billion yuan and signaling net sales by international investors, according to data compiled by Bloomberg.

More than 330 stocks on the Shanghai measure were at new 52-week highs Monday, the most since 2007, according to data compiled by Bloomberg. The index was valued at 13.9 times 12-month projected earnings yesterday, its highest since November 2010.