China Stocks Gain on Expectations of Stimulus; Developers Rise

By Chua Kong Ho

Oct. 20 (Bloomberg) -- China's stocks gained on speculation the slowest growth in five years will prompt the government to accelerate efforts to bolster the world's fourth-largest economy.

Poly Real Estate Group Co., the nation's second-largest property company, climbed 6.2 percent and Gemdale Corp. jumped 6.7 percent after the government said yesterday it will cut property transaction fees to spur apartment purchases. China Construction Bank Corp., the nation's second-largest bank, added 1.4 percent after saying profit for the first nine months increased 48 percent.

``We expect the government to come up with policies to boost the economy, especially in the property sector,'' said Michelle Qi, a Shanghai-based portfolio manager at Bank of Communications Schroder Fund Management, which oversees about $790 million.

The CSI 300 Index, which tracks yuan-denominated shares traded in Shanghai and Shenzhen, added 63.47, or 3.5 percent, to 1,896.73 at the close, the most since October 13.

The stock index has fallen 65 percent this year, as government measures to tackle inflation and cool an overheating economy eroded earnings. Stocks on the CSI 300 Index are valued at 13.4 times profit, compared with 53.1 times on Oct. 16, 2007, when the index reached its peak.

China's economy expanded 9 percent in the third quarter, the statistics bureau said today, compared with a 9.7 percent median estimate in a Bloomberg News survey. The third-quarter expansion was the weakest since the second quarter of 2003, when growth slumped because of the severe acute respiratory syndrome, or SARS, outbreak.

Home Sales

Poly Real Estate climbed 6.2 percent to 15.53 yuan, the most in a week. Gemdale, based in the southern China city of Shenzhen, gained 6.7 percent to 6.65 yuan. Financial Street Holding Co., a Beijing-based property developer, added 1.3 percent to 8.12 yuan, snapping a four-day loss.

Home sales by volume plunged 55.5 percent and 38.5 percent in Beijing and Shanghai in the first eight months from a year earlier, the official Xinhua News Agency reported, citing the China Real Estate Association.

``We advise investors to stay defensive, while awaiting further easing of monetary policy and more fiscal programs to bolster growth,'' said Jing Ulrich, chairwoman of China equities at JPMorgan Chase & Co. in Hong Kong, in an e-mail.

China Construction advanced 1.4 percent to 4.25 yuan, after saying nine-month profit climbed 48 percent to 84.6 billion yuan ($12.4 billion). China Citic Bank Corp. added 3.9 percent to 4.54 yuan, after saying profit for the first nine months likely rose by more than 130 percent.

The following shares also rose or fell in China. Stock symbols are in parentheses after company names:

Coal producers: Coal production in China, the world's second-biggest energy user, rose by 10.8 percent last month.

Kailuan Clean Coal Co. (600997 CH), based in Hebei province, gained 1.02 yuan, or 10 percent, to 11.23 yuan. Shanxi Xishan Coal & Electricity Power Co. (000983 CH) climbed 0.76 yuan, or 9.2 percent, to 9.02. Yanzhou Coal Mining Ltd. (600188 CH), based in Shandong province, gained 0.63 yuan, or 7.6 percent, to 8.9.

Wuliangye Yibin Co. (000858 CH), the Sichuan-based spirit maker, climbed 0.875 yuan, or 5.9 percent, to 13.55. Third- quarter profit rose 63 percent to 293.6 million yuan, the company said.

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net