China's Stocks Gain as Inflation Cools; Wuhan Steel Advances

By Zhang Shidong

Sept. 10 (Bloomberg) -- China stocks advanced, led by steelmakers and brokerages, after consumer prices rose at the slowest pace since June 2007, giving the central bank more room to stimulate growth.

Wuhan Iron & Steel Co., China's third-biggest steelmaker by value, rose 2 percent and Citic Securities Co., the brokerage unit of China's biggest investment company, gained 4.3 percent, the most in two weeks. Inflation slowed to 4.9 percent in August from 6.3 percent in July, the statistics bureau said today.

``The figure has eased one of the major concerns in the market, that the government will take measures to cool growth and inflation,'' said Fan Dizhao, a portfolio manager at Guotai Asset Management Co. in Shanghai, which manages the equivalent of $5.l billion. ``It has helped to boost buying sentiment.''

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, added 4.03, or 0.2 percent, to 2,143.18 at the close. Stocks rebounded after the 10 a.m. inflation report, reversing a decline of as much as 1.9 percent.

Central bank efforts to cool inflation and concern about a slowdown in global demand for the nation's products have helped drive the CSI 300 down 60 percent this year. That's made it the world's worst-performing stock market, and deflated a boom that drove the gauge up sevenfold in the two years through 2007.

Wuhan, Baoshan Steel

Wuhan Steel climbed 2 percent to 7.02 yuan. Baoshan Iron & Steel Co., China's biggest steelmaker, added 0.2 percent to 6.60 yuan.

Citic Securities advanced 4.3 percent to 19.15 yuan, the biggest gain since Aug. 27. Haitong Securities Co., the country's largest listed brokerage by market value, jumped 5.6 percent to 14.91 yuan. Pacific Securities Co., a brokerage based in the southern province of Yunnan, gained 4.1 percent to 16.70 yuan, the highest since Sept. 2.

Consumer prices had been forecast to gain 5.4 percent in August, according to the median estimate of 23 economists surveyed by Bloomberg News.

The central bank has boosted the reserve ratio requirement 16 times since the beginning of last year and increased interest rates six times to curb inflation that reached a 12-year high in February.

Guangdong Midea Electric Appliances Co. and Panzhihua New Steel & Vanadium Co. gained as their parents said they have increased or will increase their stakes in the units.

Midea, Panzhihua

Midea, China's second-biggest publicly traded appliance maker, added 4.9 percent to 9.45 yuan, extending yesterday's 7.3 percent advance. The company said its parent and affiliates will buy no more than a combined 2 percent stake in the listed unit within a year through the Shenzhen Stock Exchange. An affiliate bought 309,470 shares in the company yesterday, it said.

Panzhihua Steel, the publicly traded unit of southwest China's biggest steelmaker, rose 1.6 percent to 7.80 yuan, advancing for the first time in five days. Parent Anshan Iron & Steel Group bought a 4.9 percent stake in the listed company, or 161.2 million shares, for as much as 1.34 billion yuan ($196 million), increasing its holding to 10 percent, according to a Shenzhen Stock Exchange statement.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, rose 0.2 percent to 2,150.76. The Shenzhen Composite Index added 0.5 percent to 588.31.

The following companies were among the most active in China's markets. Stock symbols are in brackets after the companies' names.

China Eastern Airlines Corp. (600115 CH), the nation's third-largest carrier by fleet size, advanced 0.19 yuan, or 4.6 percent, to 4.34, adding to yesterday's 4.3 percent gain and Shanghai Airlines Co. (600591 CH), the city's second-largest airline, rose 0.05 yuan, or 1.2 percent, to 4.27 after climbing 6.3 percent yesterday. The two airlines said they aren't discussing a possible merger, denying media reports.

China Railway Group Ltd. (601390 CH), Asia's largest construction company, rose 0.14 yuan, or 2.8 percent, to 5.21, the highest close since Sept. 3. The company said its units won five contracts worth a combined 3.07 billion yuan.

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