China Stocks Gain; Shenhua, Chalco Rise on Report of Tax Delay

By Zhang Shidong

July 8 (Bloomberg) -- China's stocks advanced, led by commodity-related shares, after the Shanghai Securities News reported that the government will delay the introduction of higher taxes on coal and other resources.

China Shenhua Energy Co., the nation's largest coal producer, gained by the most in three weeks. Aluminum Corp. of China Ltd., also called Chalco, rose for a second day.

``The news has definitely provided an impetus to resources stocks, which were battered by tax increase speculation for quite some time,'' said Yan Ji, an investment manager at HSBC Jintrust Fund Management Co. in Shanghai, which manages the equivalent of about $850 million. ``There is a recovery of overall sentiment and a rebound is in the offing.''

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, gained 5.90, or 0.2 percent, to 2,888.66 at the 11:30 a.m. local-time break. It jumped 5.1 percent yesterday.

A measure tracking energy stocks such as Shenhua gained 2.7 percent, the most of 10 industry groups. Beijing Jingxi Tourism Development Co. dropped for the first time in seven days after saying its first-half loss widened.

Shenhua advanced 3.2 percent to 34 yuan, set for the biggest gain since June 18. Datong Coal Industry Co., China's second- largest coal company by capacity, jumped 3.7 percent to 22.20 yuan. Chalco, the nation's biggest maker of the lightweight metal, added 2.2 percent to 14.14 yuan, extending yesterday's 5.4 percent advance.

Proposal Dropped

A proposed tax increase submitted to China's State Council has yet to receive approval on concern about inflation, the Shanghai Securities News reported today. The tax increase won't be introduced in the next three months, the newspaper said.

The CSI 300 has dropped 46 percent so far this year, the second-worst performing major stock index tracked by Bloomberg, on concern rising fuel prices and inflation running at a decade- high will slow corporate earnings growth.

``I think it's almost crossed the bottom,'' said Hirokazu Yuihama, head of research and regional strategy at Daiwa Institute of Research, in an interview aired on Bloomberg Television today. ``The price-earnings ratio is less than the 10- year average.''

Olympics Visitors

Beijing Jingxi, the operator of travel facilities, lost 1.6 percent to 24.85 yuan, set to snap a six-day, 61 percent surge. The company said first-half loss probably widened to 10.7 million yuan ($1.6 million) from 5.1 million yuan a year earlier, because of rising marketing expenses and losses from stock investments, it said in a statement today.

Shares of Beijing-based companies also declined following a rally yesterday on speculation that next month's Olympic Games will lure more tourists to the capital city.

Beijing Capital Co., an operator of hotels, highways and water projects, fell 2 percent to 9.43 yuan after a 6.9 percent climb. Beijing New Building Materials Public Co. lost 2.2 percent to 8.97 yuan. It surged 9.2 percent yesterday.

The city is expecting 1.5 million visitors, including 500,000 from overseas, 22,000 journalists, and 16,000 athletes and officials for China's first Olympics, according to official estimates.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, rose 0.2 percent to 2,797.07. The Shenzhen Composite Index added 0.1 percent to 847.97.

The following stocks rose or fell and the stock symbols are in brackets after companies' names.

China Minsheng Banking Corp. (600016 CH), the nation's first privately owned bank, added 0.14 yuan, or 2.4 percent, to 6.05, a fifth straight day of gains. The lender said first-half profit may have surged more than 110 percent as lending, investment returns and income from asset management expanded.

Changsha Zoomlion Heavy Industry Science & Technology Development Co. (000157 CH), China's second-biggest maker of concrete-handling machinery, rose 0.33 yuan, or 2.3 percent, to 14.96. The company said first-half profit may have doubled on higher sales of its equipment.

Lvjing Real Estate Co. (000502 CH), the property developer in the southern city of Guangzhou, jumped 0.58 yuan, or the 10 percent daily limit, to 6.41. The company said first-half profit probably surged 10-fold from a year earlier on higher sales and margins, according to a statement to the Shenzhen Stock Exchange.

Shanghai AJ Corp. (600643 CH), a state-owned investment company, surged 0.99 yuan, or 10 percent, to 10.90 on trading resumption. Shougang Holding (Hong Kong) Ltd. (697 HK) agreed to buy 120 million Shanghai AJ shares.

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net