Most Chinese Stocks Rise as Developers Advance; Yuan Weakens

  • Investors cautious before Fed decision, Jingxi's Wang says
  • Vanke surges most in Hong Kong before Friday's home-price data

Most Chinese stocks rose as property developers climbed after the Communist Party’s Politburo vowed to stabilize the real estate market. The yuan weakened for an eighth day.

About two stocks climbed for each one that fell on the Shanghai Composite Index, which closed 0.3 percent lower at 3,510.35. Chinese property shares were the best performers on Tuesday, with Poly Real Estate Group Co. and Gemdale Corp. increasing at least 1.3 percent after the Politburo called for measures to lower inventories. Material producers and brokerages declined after posting the biggest gains among industry groups on Monday.

China’s benchmark gauge has rebounded 20 percent from an August low after the government took unprecedented measures to prop up equities following a $5 trillion rout earlier in the year. The economy has also showed recent signs of stabilization, clearing a potential hurdle for the Federal Reserve to raise interest rates this week for the first time in almost a decade. Fed officials put off a rate increase in September because of growing risks, mainly from China, to their outlook for economic growth.

“There’s uncertainty over the global economy after a potential U.S. interest-rate increase and whether China’s economy will continue to pick up,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co., who’s keeping his stock allocation unchanged with a preference for smaller companies. "Investors are cautious. At the same time, if the market slides, some funds will bottom fish for bargains. That’s why we see a tight range for the market recently.” 

Data over the weekend on China’s industrial production, retail sales and fixed-asset investment all exceeded forecasts and follow reports that show imports are moderating and consumer inflation is picking up. Housing-price data for November are scheduled to be released on Friday.

A home-price recovery slowed in October, as a supply glut in less-prosperous cities challenges the authorities’ efforts to revive the residential market with interest-rate cuts and easing of mortgage restrictions. A rising stockpile of unsold new homes is hampering government efforts to spur investment, prompting President Xi Jinping to pledge in a meeting last month to “dissolve property inventories.” 

The Shanghai property gauge rose 0.6 percent. This year’s advance of 4.1 percent lags the 8.5 percent gain for the broader index. China Vanke Co., the biggest-listed Chinese developer, surged 5 percent in Shenzhen to extend the 2015 rally to 52 percent. The stock was the best performer in Hong Kong with a 3.9 percent jump. Poly Real Estate gained 1.3 percent, while Gemdale added 4.4 percent.

H-Shares Outlook

The CSI 300 Index slipped 0.5 percent. Hong Kong’s Hang Seng Index dropped 0.2 percent for a ninth straight day, the longest stretch of losses since July 1984, while the Hang Seng China Enterprises Index advanced 0.3 percent, paring this year’s slump to 22 percent.

With H shares tumbling at the fastest pace among global peers, analysts are downgrading their forecasts and valuations have dropped to levels approaching those of Zambia. Investors have instead been driven away by weak economic growth and an anti-graft campaign that led to the disappearance or arrest of some of China’s most high-profile corporate executives.

"I was fooled," said Hao Hong, the chief China strategist at Bocom International Holdings Co. in Hong Kong. "Cheap is not enough."

While Hong was one of the few analysts to call both the start and peak of this year’s boom in domestic Chinese shares, his forecast for gains in Hong Kong-listed equities proved too optimistic. Hong now says the H-shares index will be stuck in a trading range.

Capital Outflows

A measure of material stocks in the CSI 300 fell 0.9 percent after surging 3.3 percent on Monday on speculation a cut in metal output will boost prices and the government will speed up reorganization of state-owned metal groups. Jiangxi Copper Co. fell 3 percent, after gaining 6.4 percent Monday. 

Citic Securities Co. slumped 3.8 percent, halting a four-day, 10 percent advance. Guotai Junan Securities Co. fell for the first time in five days, losing 4.6 percent.

The yuan fell 0.04 percent to 6.4618 a dollar in Shanghai, taking its eight-day decline to 1 percent, the longest run of losses since June. The Chinese currency is weakening on increased capital outflows and speculation that the central bank is guiding the currency lower to help an economy growing at the slowest pace in 25 years.

— With assistance by Shidong Zhang

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