China Stocks Advance as Inflation Concern Eases; Ping An Rises

By Zhang Shidong and Chua Kong Ho

Aug. 15 (Bloomberg) -- China's stocks rose, led by financial companies, as some investors took advantage of the cheapest valuations in more than two years to buy shares and as lower oil prices eased concern that inflation will accelerate.

Ping An Insurance (Group) Co., China's second-biggest insurer, and China Merchants Bank Co. led the advance. Panzhihua New Steel & Vanadium Co. jumped by the 10 percent daily limit after a bigger rival bought a stake in the company. Zijin Mining Group Co. retreated after gold futures dropped.

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, rose 4.10, or 0.2 percent, to 2,447.61 at the close, trimming its weekly loss to 5.6 percent. All but 37 stocks in the measure fell this week, by as much as 34 percent. The gauge is at 18 times reported earnings, the lowest since March 2006, according to data compiled by Bloomberg.

``Valuations now look extremely attractive to medium-term investors with a two- to three-year view,'' Geoff Lewis, the Hong Kong-based head of investment services at JF Asset Management Ltd., which oversees $110 billion, told Bloomberg Television. ``So far, the economy is headed for a soft landing and earnings reports have on the whole been satisfactory.''

Merchants Bank on July 4 said first-half profit may have more than doubled as the company extended more loans. It's scheduled to report the earnings on Aug. 19.

Global Indexes

China's benchmark index has tumbled 54 percent this year, the most among 88 global measures tracked by Bloomberg, on concern government measures to cool inflation will damp earnings. The gauge's 14-day relative strength index, showing how rapidly prices have advanced or dropped during the specified time period, was at 27 yesterday. Some investors regard readings below 30 as a trigger to buy securities.

Ping An rose 1.8 percent to 41.83 yuan. Merchants Bank, the nation's biggest dual-currency credit-card issuer, added 1.8 percent to 21.99 yuan. Shanghai Pudong Development Bank Co., the Chinese partner of Citigroup Inc., rose 0.7 percent to 21.26 yuan.

Crude oil dropped as much as 1.4 percent to $113.36 a barrel in after-hours trading. Yesterday, the futures fell 0.9 percent to settle at $115.01 a barrel on the New York Mercantile Exchange. Prices have tumbled 23 percent from the record $147.27 reached on July 11.

Panzhihua

Panzhihua Steel, the publicly traded unit of southwest China's biggest steelmaker, jumped 10 percent to 7.58 yuan. The company said Anshan Iron & Steel Group bought a 5.09 percent stake for at least 1.07 billion yuan.

Maanshan Iron & Steel Co., one of China's biggest producers of construction steel, gained 2.6 percent to 4.38 yuan. Maanshan Steel said first-half profit more than doubled to 2.26 billion yuan after it raised prices on increased demand.

Zijin Mining, China's largest gold producer, lost 1.5 percent to 5.34 yuan. Zhongjin Gold Corp., the second-biggest, slid 4.5 percent to 33.08 yuan. Shandong Gold Mining Co., the No. 3, sank 7 percent to 37.27 yuan.

Gold fell 2 percent to $814.50 an ounce in New York yesterday. The metal is down 5.8 percent for the week and about 20 percent from its record of $1,032.70 on March 17.

Haitong Securities Co., the country's largest listed brokerage by market value, dropped 3.9 percent to 16.88 yuan. The company reported a 1.4 percent decline in first-half profit as the country's equity market plunged, trimming fees and trading income. Net income fell to 2.01 billion yuan.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, added 0.6 percent to 2,450.61. The Shenzhen Composite Index fell 0.2 percent to 697.13.

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