China Stocks Set for 1st Gain in 9 Weeks on Government Action

By Zhang Shidong

Sept. 26 (Bloomberg) -- China's stocks rose, with the benchmark index set for its first gain in nine weeks, after the government increased support for the world's second-worst performing market this year.

Tsingtao Brewery Co., China's biggest brewer by sales, jumped 6.2 percent as its state-run parent bought more equity a week after the government urged big shareholders to stabilize the market. China Petroleum & Chemical Corp. fell 2 percent on a government report that industrial companies' profits grew at half the pace of a year earlier.

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, advanced 11.59, or 0.5 percent, to 2,235.13 as of 2:30 p.m. local time. It has gained 7.8 percent this week. Earlier, the measure retreated as much as 1.4 percent on concern that government support won't prevent further declines because of a global economic slowdown.

``There are some concerns about the third-quarter earnings outlook as the domestic economy is on a downtrend,'' said Fan Dizhao, an investment manager at Guotai Asset Management Co. in Shanghai, which manages the equivalent of $5.l billion.

The CSI 300 has rebounded 18 percent since Sept. 18, when the government said it would buy more shares in the three- biggest listed banks and cut a stock trading tax to shore up equities. The gauge has slumped 58 percent this year on concern global demand for Chinese products will slow and as the government tightened lending to cool inflation.

Buy on Credit

China's State Council, or Cabinet, agreed to let investors buy shares on credit and sell borrowed stock to help develop the market, an official familiar with the plan said. It will take several days for the paperwork to go through, and the plan will be announced before the week-long National Day holiday next week or right after it, said the official.

``It's quite positive for the market and will help attract fresh capital into equities,'' said Wu Kan, a fund manager in Shanghai at Dazhong Insurance Co., which oversees the equivalent of $285 million. ``Given the current level the index is standing at now, I do think some investors will buy low through margin trading so as not to miss the boat.''

The introduction of margin trading follows last week's cut in interest rates, and the State-owned Assets Supervision and Administration Commission's appeal on Sept. 18 for government- owned companies to be ``a role model'' in promoting ``stable'' development of the nation's capital markets by buying back shares in publicly traded units.

Tsingtao

Tsingtao Brewery rose 5.7 percent to 16.80 yuan. The company said its state-controlled parent bought 1.9 million Shanghai-listed shares yesterday, increasing its stake to 30.71 percent from 30.56 percent.

China United Telecommunications Corp. rose for a third day, advancing 1.8 percent to 5.53 yuan, after it said yesterday its controlling shareholder bought about 50 million shares.

As of today, 52 companies have announced that their parents increased stakes in the listed units in response to the government appeal to support the market, Citic Securities Co. said in a note today.

China Petroleum or Sinopec, Asia's biggest oil refiner, fell 3.9 percent to 10.40 yuan. PetroChina Co., the nation's biggest oil company, lost 1.7 percent to 12.79 yuan.

Net income for Chinese industrial companies rose 19.4 percent from a year earlier to 1.87 trillion yuan ($274 billion), the statistics bureau said today. That was less than the 37 percent increase a year earlier. The oil refining and coking industry swung to a net loss of 96.1 billion yuan ($14 billion) in the first eight months as crude costs surged.

Ping An

Ping An Insurance (Group) Co., China's second-biggest insurer, dropped by the most in almost three months on concerns about losses on its investments in financial services company Fortis. Ping An slid 9.2 percent to 32.94 yuan, set for the biggest decline since July 2.

Ping An paid 1.81 billion euros for a 4.2 percent stake in Fortis, Belgium's biggest financial-services provider, in November. Its 2.15 billion euros purchase of half of the asset- management arm of Fortis is still pending regulatory approval.

``Concerns about Ping An's Fortis investments are the main reason for the drop,'' said Liu Peng, a Nanjing-based analyst at Huatai Securities Co. ``Investors are also getting more concerned about the insurer's overall investment performance as market volatility increased.''

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, fell 1.6 percent to 2,260.68. The Shenzhen Composite Index lost 0.4 percent to 605.52.

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