China Shares Roll after PMI Data
Chinese stocks rose, sending the benchmark index to a three-month high, as a jump in the nation’s manufacturing gauge spurred optimism the government will meet its economic-growth target for this year.
Industrial Bank Co. (601166) and Poly Real Estate Group Co. gained more than 3 percent to lead a rally for lenders and developers. Sinolink Securities Co. surged 5.8 percent on speculation new share sales will boost earnings. Ping An Insurance (2318) (Group) Co., China’s second-biggest insurer, climbed to a three-month high in Hong Kong. A preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics, known as flash PMI, was at an 18-month high of 52, compared with the 51 median estimate.
The Shanghai Composite Index (SHCOMP) climbed 0.8 percent to 2,095.85 at the 11:30 a.m. break. The measure jumped to a three-month high on economic optimism after the government accelerated spending, allowed some local governments to loosen property curbs and cut reserve-requirement ratios for some lenders.
“The PMI data indicate the decline in economic growth halted and the economy is recovering,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “The relaxation by local governments of home-purchase restrictions will add to the strength of the economy. That’s all positive for stocks.”
The Hang Seng China Enterprises Index (HSCEI) advanced 0.7 percent, after closing at its highest level since Dec. 27 yesterday. The CSI 300 Index rose 1.3 percent, adding to this month’s 2.8 percent gain. The ChiNext slumped 1.6 percent, extending losses to 9.4 percent in July.
‘Old Economy’
China’s “old economy” stocks in state sectors such as commodities and finance have rebounded on signs looser credit and faster spending are stabilizing the economy. Last year’s rally in “new economy” companies in industries such as technology and health care faltered amid concern valuations are excessive.
The CSI 300 and Shanghai Composite are valued at no more than 8.2 times 12-month projected earnings, compared with the multiple of 28 for the ChiNext, according to data compiled by Bloomberg.
A measure of financial stocks including banks, developers and brokerages jumped 2.4 percent, the most among the CSI 300’s 10 industry groups. Industrial Bank added 3.5 percent, while China Construction Bank Corp. gained 1 percent. China’s one-year interest-rate swaps dropped for a fourth day after the central bank refrained from draining money from the banking system amid cash demand boosted by share sales.
Poly Real Estate, China’s second-largest developer by market value, rallied 4 percent. China Vanke Co., the biggest, advanced 3 percent. Sina.com reported yesterday that Haikou has become the latest city to relax home-purchase restrictions. Hohhot in northern China and Jinan in the east have already loosened property curbs.
Brokerages Gain
“The housing market had quite a serious correction and the authorities have taken very modest selective steps to support the market,” Steven Bell, an economist at London-based F&C Asset Management Plc, said by phone yesterday.
Changjiang Securities Co. soared 10 percent and Sinolink Securities climbed the most since May 28. Four companies are selling new shares today, bolstering the earnings outlook for brokerages.
Ping An Insurance jumped for a third day in Hong Kong, adding 2.8 percent. UBS AG, JPMorgan Chase & Co., Blackstone Group and others spent more than HK$2 billion buying about 36 million Ping An H-shares in the first two weeks of this month, Great Wisdom reported on its microblog, without saying where it got the information.
“The insurance industry has strong fundamentals,” said Tina Sun, an analyst at Shenyin & Wanguo Securities Co.
Flash PMI
The Chinese manufacturing gauge rose to an 18-month high in July, bolstering the government’s chances of meeting its 2014 economic-growth target of about 7.5 percent.
“The cumulative impact of mini-stimulus measures introduced earlier is still filtering through,” Qu Hongbin, HSBC’s chief China economist in Hong Kong, said in a statement today. “We expect policy makers to maintain their accommodative stance over the next few months to consolidate the recovery.”
A separate manufacturing PMI from the National Bureau of Statistics and China Federation of Logistics and Purchasing will also be published Aug. 1. That gauge rose to 51.0 in June, the highest reading this year, from 50.8 in May.
To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Allen Wan, Phani Varahabhotla
Source: Bloomberg
