China Stocks Rise as Rare-Earth Shares Gain, Oil Firms Drop

  • Rally falters, turnover wanes as stimulus hopes fade
  • Rare-earth shares gain on state reserve speculation: analyst

Chinese stocks rose for the first time in three days as a rally by rare-earth producers offset falling energy shares.

The Shanghai Composite Index rose 0.3 percent at the close, after declining the most in three weeks Monday. Xiamen Tungsten Co. and China Northern Rare Earth Group High-Tech Co. gained more than 3 percent, while Yantai Jereh Oilfield Services Group Co. led losses by energy companies. The volume of shares traded on the gauge was 27 percent below the 30-day average.

The March rebound in mainland equities has slowed this month, with the benchmark index up just 1.3 percent this month amid waning turnover as better economic data spur concern the government will refrain from adding stimulus. The Shanghai gauge remains the worst performer globally this year, with a 14 percent drop. Prudence will feature more prominently in China’s monetary policy than last year, while a certain degree of looseness will be maintained, the Xinhua News Agency said in a commentary on Monday.

"Speculation the authorities will take steps to cut capacity as well as boost buying for state reserves is lifting rare-earth producers," said Shen Zhengyang, strategist at Northeast Securities Co. in Shanghai. "The ‘prudence’ note will have some impact on market sentiment as credit growth has been fueling stock gains and regulators may be concerned about over-leveraging."

The Shanghai Composite closed at 3,042.82. The Hang Seng China Enterprises Index climbed 1.7 percent to its highest level since Jan. 4, with CGN Power Co. and PetroChina Co. leading gains as crude rebounded. The Hang Seng China AH Premium index fell to its lowest level since November. The Hang Seng Index rose 1.3 percent, paring its loss to 2.2 percent.

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