China Stocks Gain for First Time in Four Days; Daqin Advances

By Zhang Shidong and Chua Kong Ho

July 2 (Bloomberg) -- China's stocks rose for the first time in four days as some investors took advantage of a market slump that the state-run Xinhua News Agency described as ``irrational'' to buy stocks.

Daqin Railway Co., the operator of China's biggest coal transport network, and Aluminum Corp. of China Ltd., the country's biggest maker of the metal, led the advance.

``Valuations have come down significantly and if you look at growth prospects over the long term, stocks are quite fairly valued,'' said Lode Vermeersch, chief investment officer of KBC Goldstate Fund Management Co. in Shanghai, which manages the equivalent of $634 million in assets.

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, added 41.57, or 1.5 percent, to 2,739.92 at the 11:30 a.m. break in Shanghai, following a three- day, 9.5 percent decline.

The gauge has slumped 49 percent this year amid concern government measures to curtail inflation will hurt corporate profits. The measure's 14-day relative strength index, which measures how rapidly stocks have risen or fallen in that period, dropped to 31 yesterday, close to the 30 level that some investors use as a signal to buy.

Economic growth running at better than 10 percent a year helped the CSI 300 climb almost sixfold in 2006 and 2007.

Last year's boom and the recent slump were ``irrational'' and the market shouldn't be ``overly dependent'' on short-term policies, Xinhua said in an editorial late yesterday. China's stock market can still have a ``stable and healthy development'' under the current positive economic conditions, the agency said.

`Some Relief'

China's economic situation is ``better'' than expected even though growth may slow, Xinhua said.

Daqin Railway climbed 4.9 percent to 13.67 yuan, paring its 2008 drop to 47 percent. Aluminum Corp., known as Chalco, added 3.9 percent to 13.49 yuan. The stock is down 66 percent this year.

``Xinhua's article provides some relief and reassurance,'' said Zhang Ling, who manages the equivalent of 1.1 billion at ICBC Credit Suisse Asset Management Co. in Beijing. ``But there won't be any material impact. The fundamental things haven't changed yet and this year could be a turning point for China's economy moving to the downside.''

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, rose 1.6 percent to 2,693.42. The Shenzhen Composite Index added 2 percent to 792.18.

Elsewhere, Gansu Jiu Steel Group Hongxing Iron & Steel Ltd., the listed unit of the second-biggest steelmaker in northern China, climbed 4.7 percent to 9.38 yuan. The stock was set for the biggest gain since June 25.

Parent Jiuquan Iron & Steel Group agreed to transfer all its steel and mining assets into a venture with Netherlands- registered metals group International Mineral Resources BV, said the listed unit in a statement today.

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net; Chua Kong Ho in Shanghai at Kchua6@bloomberg.net.
Last Updated: July 2, 2008 00:08 EDT