China Stocks Rise to Four-Week High; Poly Advances on Forecast

By Zhang Shidong

July 9 (Bloomberg) -- China stocks rose to the highest in four weeks amid speculation earnings growth is robust enough to withstand government measures to curb inflation.

Poly Real Estate Group Co., the country's No. 2 developer by market value, and Cosco Shipping Co., a unit of China's biggest shipping company, gained after forecasting higher profits.

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, gained 96.59, or 3.3 percent, to 2,998.43 as of 1:51 p.m. local time. About eight stocks rose for each that fell on the gauge, which was headed for its highest close since June 12. The gauge has lost 44 percent in a slump this year that erased as much as $2.2 trillion in market value.

``First-half corporate earnings have exceeded expectations,'' said Fan Dizhao, a Shanghai-based analyst at Guotai Asset Management Co., which oversees the equivalent of $7 billion. ``Sentiment has been improving as valuations have dropped to a very low level after the rout.''

A measure tracking financial stocks including Poly Real Estate jumped 5.1 percent, the most among the CSI 300's 10 industry groups.

Poly Real Estate jumped by the 10 percent daily cap to 17.27 yuan, set for the highest since June 6. The company said first- half profit may have surged between 220 and 270 percent from a year earlier.

China Vanke Co., Poly's larger rival, climbed 6.2 percent to 9.83 yuan, on course for its biggest advance since April 25. Gemdale Corp., a Chinese developer that partnered with ING Groep NV, jumped by the 10 percent daily limit to 10.10 yuan.

``There's still very strong underlying demand in China for property due to the ongoing urbanization,'' Karma Wilson, Head of Asian equities at AMP Capital Investors Ltd. in Sydney, said in an interview with Bloomberg Television today.

Central Bank Action

Cosco Shipping climbed 8 percent to 28.93 yuan, set for the biggest advance since April 25. First-half profit rose 141 percent from a year earlier, the company said. China Shipping Development Co., the nation's biggest oil carrier, gained 3.8 percent to 21.64 yuan. China Cosco Holdings Co., the country's largest container line, rose 4.7 percent to 21.50 yuan.

China Life Insurance Co., the nation's biggest insurer, surged by the 10 percent daily limit to 25.17 yuan. The stock jumped on expectations the firm will post ``solid'' first-half profits, said Olive Xia, an analyst at Core Pacific Yamaichi.

``The recent rebound on China's stock market is also helping, since it bolsters insurance companies' investment gains,'' said Xia, who is based in Shanghai.

The CSI 300's decline this year has made it the second-worst performing major stock index tracked by Bloomberg. Stocks have fallen as the central bank required lenders to set aside a record amount of money in reserve to curb inflation running at the highest in more than a decade. The People's Bank of China raised interest rates six times in 2007.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, rose 2.9 percent to 2,894.45. The Shenzhen Composite Index added 1.5 percent to 870.63.

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

China Garments Co. (000902 CH), a manufacturer of apparel and textile products, lost 0.07 yuan, or 1.6 percent, to 4.37. The company said its first-half loss probably widened to about 12 million yuan ($1.8 million) from 5.6 million yuan a year earlier because of rising labor costs and investment losses, according to a statement to the Shenzhen Stock Exchange today.

China Oilfield Services Ltd. (601808 CH), the drilling unit of the nation's third-largest oil producer, rose 0.73 yuan, or 3.1 percent, to 24.68, the fourth day of gains. Goldman Sachs Group Inc. raised the recommendation on the stock to ``buy'' from ``neutral'' after China Oilfield said on July 7 it will acquire Awilco Offshore ASA to expand its rig fleet.

Luthai Textile Co. (000726 CH), a textile producer, advanced 0.68 yuan, or 8.6 percent, to 8.58, set for the highest since June 5. The company said it won regulatory approval to sell as many as 150 million shares.

Hangzhou Iron & Steel Co. (600126 CH), a Chinese steelmaker, added 0.12 yuan, or 2 percent, to 6.11, set for the highest since June 18. The company said first-half profit rose more than 50 percent because of higher prices and lower costs, according to a statement to the Shanghai Stock Exchange.

Shanghai International Port (Group) Co. (600018 CH), the operator of the world's second-busiest container harbor, rose 0.09 yuan, or 1.8 percent, to 5.18, set for the highest since June 26. Shanghai Port said first-half profit may have jumped by 30 percent as the market environment remained ``healthy'' and it trimmed costs.

Zhongchu Development Stock Co. (600787 CH), a Chinese logistics company, surged 0.62 yuan, or the 10 percent daily limit, to 6.81. Net income rose about 150 percent for the six months ended June 30, from 56.6 million yuan for the same period a year earlier, because of expanded marketing operations and acquisitions, it said in a statement.

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