(Bloomberg) — China’s stocks rose, driving the Shanghai Composite Index to its biggest gain in six months, on speculation the government will adopt measures to boost equities following declines in the past month.
Citic Securities Co., the country’s largest brokerage, jumped 6.6 percent and Poly Real Estate Group Co. surged 8.2 percent after Liu Xinhua, vice chairman of the China Securities Regulatory Commission, that regulators will promote a “stable and healthy” market. Aluminum Corp. of China Ltd. rose 9.6 percent after Alcoa Inc. said Chinese demand for aluminum will increase this year.
The benchmark index rose 130.05, or 4.8 percent, to 2,845.02, the most since March 4 and capping a three-day gain that’s almost erased a 6.7 percent plunge on Aug. 31. Chinese stocks trading in the U.S. climbed the most in two weeks, with the American Stock Exchange China Index gaining 1.9 percent to 195.02 at 11:41 a.m. New York time.
“The regulator’s comment has prompted speculation the government may take steps to support the market,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which manages about $285 million.
The Shanghai stock index slumped the most since October last month as banks reined in lending to avert asset bubbles and policy makers advised industries such as steel and cement to curb overcapacity. The gauge had rallied 103 percent from a November low on prospects a 4 trillion yuan ($586 billion) stimulus package and record lending would revive growth in the world’s third-largest economy.
“It’s not a bubble,” said Russell Hoss, manager of the EPH China fund, in Newport Beach, California. “Valuations are reflective of growth rates.” The Shanghai index is trading at 21 times estimated earnings, compared with forecast earnings growth of 46 percent, he said.
Liu’s comments, made at a financial forum in Beijing yesterday, were featured on the front pages of the China Securities Journal and the Shanghai Securities News, the nation’s biggest financial newspapers.
Calls to Liu’s office went unanswered. Xia Lihua, an official at the regulators’ news office, said there were no additional details to be publicly released about possible stock- market support measures.
Citic Securities advanced 6.6 percent to 26.56 yuan, the most since July 6. Poly Real Estate, China’s second-largest developer by market value, gained 8.2 percent to 23.82 yuan. Baoshan Iron & Steel Co., the nation’s biggest steelmaker, rose 7 percent to 6.43 yuan after losing 33 percent in August.
The government may take measures to stabilize the market before the 60th anniversary of the founding of the People’s Republic of China on Oct. 1, the start of a weeklong holiday.
“They want everything to be stable and in harmony,” said Francis Lun, general manager of Fulbright Securities Ltd., in an interview with Bloomberg Television today. “They will approve more stock market funds and allow them to buy into the market.”
Everbright Pramerica Fund Management Co. started marketing a mutual fund yesterday after receiving approval from the securities regulator, the China Securities Journal said yesterday, without saying where it obtained the information.
Plunging equity markets last year forced regulators to impose a moratorium on domestic initial public offerings. The nine-month ban on sales was lifted in June as stocks recovered.
Aluminum Corp. of China, the nation’s largest aluminum producer and also known as Chalco, advanced 9.6 percent to 13.47 yuan. Alcoa expects China’s consumption of the material to rise 4 percent this year, compared with Alcoa’s previous prediction of zero growth, Chief Executive Officer Klaus Kleinfeld said in an interview in New York. Shandong Nanshan Aluminum Co., the No. 2, soared 8.5 percent to 10.38 yuan, the most in five weeks.
The CSI 300 Index, measuring Shanghai and Shenzhen exchanges, gained 5.6 percent to 3,051.96.
In New York, the Bank of New York Mellon China ADR Index, which tracks American depositary receipts, rose 1.3 percent to 354.25. Sina Corp. surged 4.2 percent to $30.54 after China’s biggest Internet portal was upgraded to “neutral” from “reduce” at Nomura International (HK) Ltd., which said the worst is over for China’s advertising market.
Higher gold prices drove Zijin Mining Group Co., the nation’s biggest producer of the precious metal, 9.2 percent higher at 8.79 yuan. Zhongjin Gold, the No. 2, climbed the 10 percent daily limit to 52.31 yuan. Gold futures for December delivery rose 2.3 percent yesterday in New York, the most since March 19. Gold for immediate delivery advanced 2.4 percent at 3:58 p.m. Shanghai time.
SAIC Motor Co., the Chinese partner of General Motors Co., gained 6.7 percent to 18.55 yuan after GM said full-year sales in China may rise more than 40 percent as tax cuts and stimulus measures helped double demand in August.
Chongqing Changan Automobile Co., partner of Ford Motor Co. and Mazda Motor Corp., added 7.4 percent to 10.25 yuan. Changan Ford Sales Co. said August sales rose 111 percent.
China’s decision makers should refrain from shifting abruptly from their moderately loose monetary policy to a tightening stance as concerns about inflation are “excessive,” Ba Shusong, deputy head of financial research at the Development Research Center, which advises the State Council, said in Beijing yesterday.
Premier Wen Jiabao on Sept. 1 reiterated the government will stick to its pro-active fiscal policy and moderately loose monetary policy.