Chinese Stocks Advance as Manufacturing Expands; Zoomlion Gains

By Bloomberg News

July 1 (Bloomberg) -- China’s stocks rose, led by industrial and financial companies, as an expansion in the country’s manufacturing for a fourth month indicated the world’s third-largest economy is recovering.

Changsha Zoomlion Heavy Industry Science & Technology Development Co. gained 4.1 percent and Angang Steel Co. advanced 4 percent. Bank of China Ltd., the country’s third-largest lender, added 1.1 percent.

“Expectations the economy will recover will push stock prices higher,” said Wang Peng, Shanghai-based chief investment officer at First Trust Fund Management Co., which oversees about $2.1 billion. “We expect listed companies to post earnings gains in the third or fourth quarter.”

The Shanghai Composite Index rose 30.34, or 1 percent, to 2,989.71 as of 1:25 p.m., extending a 64 percent annual advance. It breached the 3,000 level today for the first time in more than a year. Shares on the index trade at 25.6 times earnings, the most expensive since March 2008, weekly data compiled by Bloomberg show.

The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, gained 1.5 percent to 3,214.21.

The official Purchasing Managers’ Index increased to a seasonally adjusted 53.2 in June from 53.1 in May, a government report showed today, above the 50 level that indicates an expansion. Export orders expanded for a second month, according to the reports. Another PMI, released today by CLSA Asia-Pacific Markets, also showed an expansion.

Zoomlion, Angang

Zoomlion Heavy, China’s second-biggest maker of concrete- handling machinery, climbed 4.1 percent to 23.25 yuan. Angang Steel, China’s second-largest steelmaker by market value, rose 4 percent to 13.72 yuan. Guangxi Liugong Machinery Co., a Chinese maker of construction equipment, added 2.8 percent to 17.11 yuan.

Growth is likely to continue to improve in June, Zhang Liqun, an economist at the State Council Development and Research Center, said in a statement, describing the economy as in a “preliminary” recovery.

Bank of China gained 1.1 percent to 4.54 yuan. Bank of Communications Ltd., part-owned by HSBC Holdings Plc, added 2.3 percent to 9.22 yuan. Central Huijin Investment Co. said today it has no plans to sell its holdings in Chinese banks.

The Shanghai index has rebounded in 2009, making it the world’s second-best performer, after plunging 65 percent last year. Stocks have rallied as investors bet a 4 trillion yuan ($585 billion) stimulus plan and record lending will revive an economy that grew the least since 1999 in the first quarter.

The economy may keep improving in the third and fourth quarters, enabling the nation to meet its 8 percent economic growth target for this year, central bank Governor Zhou Xiaochuan said this week.

“The domestic economy is definitely recovering but this has been mostly priced in and it wouldn’t be surprising if the market stages a correction at some point,” said Chen Wenzhao, a strategist at China Merchants Securities Co. in Shanghai. [bn:WBTKR=000513:CH]

Livzon Pharmaceutical Group Inc. [] rose 6.9 percent to 28.40 yuan after the company, known in Chinese as Lizhu Pharmaceutical, said one of its drugs was found in tests to inhibit swine flu.

--Zhang Shidong. Editors: Richard Frost, Linus Chua

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-7014 or szhang5@bloomberg.net