China’s Stocks Eke Out Gains as Data Show Economy Is Stabilizing

  • Gross domestic product grew 6.7% in 3Q, as analysts projected
  • Commodity producers are biggest gainers on Shanghai gauge

China 3Q GDP Remains Steady at 6.7% on Year

China’s stocks held at a six-week high as commodity companies climbed after data showed the world’s second-largest economy is stabilizing.

The Shanghai Composite Index gained less than 0.1 percent at the close. China Molybdenum Co. led advances by rare-earth producers, while China Shenhua Energy Co. rose to an 11-month high. Gross domestic product expanded 6.7 percent in the previous quarter, the third straight period at that pace. Hong Kong’s Hang Seng Index slid 0.4 percent as inflows from mainland investors continued to dwindle.

Releases for September showed the continuing shift in China’s economy toward consumer spending, with retail sales gains outpacing the rise in industrial production. Better-than-estimated new credit data released Tuesday suggests strong lending will continue to help stabilize growth. Such liquidity has been of little help to the Shanghai Composite, which is down 13 percent this year as investors piled into property in the wake of last year’s $5 trillion stock market crash.

“The reaction today is just average because it’s within expectations," said Ben Kwong, a Hong Kong-based director at KGI Asia Ltd. “Growth in industrial production is below expectations, whereas others are generally roughly the same."

The Shanghai Composite Index rose to 3,084.72, its highest close since Sept. 8. China Molybdenum climbed 4.8 percent, and Jinduicheng Molybdenum Co. gained 1.5 percent.

China United Network Communications Ltd. advanced 3.7 percent. investors were interested in the possibility of mixed-ownership reforms by its parent, a state enterprise, Nomura Holdings Inc. analyst Joel Ying said.

Retail sales in China rose 10.7 percent last month from a year earlier, matching the median economist forecast. Fixed-asset investment increased 8.2 percent in the first nine months, meeting analysts’ expectations.

The stabilization in growth gives room for policies aimed at containing swelling leverage and curbing excessive financial risks, with the IMF among those calling for such efforts. The government released guidelines last week for reducing debt, yet past pledges have often been ignored as rampant credit growth fuels surging home prices in the nation’s biggest cities -- prompting some local governments to roll out property curbs.

“Whether it’s sector policy or financial policy, China in general has a target to maintain GDP growth, so there won’t be any significant slowdown," said Kevin Leung, director for global investment strategy at Haitong International Securities Group Ltd. in Hong Kong. “The thing you have to worry about now is what’s going to happen to property. With all those curbs, fourth-quarter property sales will definitely slow -- that’s pretty much a given. "

Stock Valuations

China Life Insurance Co. slipped 2.7 percent to lead losses on the Hang Seng Index after the firm said profit in the first nine months probably fell about 60 percent as investment income declined.

Valuations on the Hong Kong benchmark index climbed to a five-year high last month as mainland inflows into the city’s stocks swelled to a record. Net purchases via an exchange link with Shanghai slowed to a trickle in the past week, weighing on the gauge. The index trades at 12.6 times reported earnings, compared with the MSCI All-Country World Index’s 21 multiple.

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