By Bloomberg News
Sept. 1 (Bloomberg) -- China’s stocks rose, following the Shanghai Composite Index’s biggest drop since June 2008, as financial companies gained on speculation recent declines were excessive and as country’s manufacturing expanded.
Bank of China Ltd. added 2.5 percent, climbing from a three-month low. China Life Insurance Co. added 3.7 percent, snapping a three-day retreat, after UBS AG raised its rating on the stock. Jiangxi Copper Co. slid 3.9 percent, leading losses by commodity producers, after metal prices fell. Zhongjin Gold Corp. lost 5.7 percent.
The Shanghai Composite Index added 12.09, or 0.5 percent, to 2,679.84 at the 11:30 a.m. break after swinging between gains and losses more than 10 times. The gauge plunged 6.7 percent yesterday and entered a bear market on concern a slowdown in lending growth may derail a rebound in the world’s third-largest economy. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, rose 0.3 percent to 2,839.41.
“Investors are watching to see what the government’s policies on liquidity will be,” said Zhao Zifeng, who helps oversee about $10.2 billion at China International Fund Management Co. in Shanghai. “China’s economy appears to be recovering, but any sign that the pace of recovery is slowing would leave the market very vulnerable.”
Manufacturing expanded at the fastest pace in 16 months in August, driven by record lending in the first half of the year, two surveys showed.
Manufacturing Surveys
The official Purchasing Managers’ Index added to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said. The HSBC PMI, previously released by CLSA Asia-Pacific Markets, showed an overall increase to 55.1 from 52.8 in July.
Bank of China, the country’s third-largest bank, added 2.5 percent to 3.76 yuan. The stock’s 14-day relative strength index, measuring how rapidly prices have advanced or dropped during a specified time period, was at 27.3 yesterday. Readings below 30 indicate to some traders a security may be poised to rise.
China Minsheng Banking Corp., the nation’s first privately owned bank, gained 2 percent to 6.19 yuan.
China Life rallied 3.7 percent to 26.03 yuan, ending a three-day, 11 percent drop. The stock was the biggest contributor to gains on the Shanghai index. Ping An Insurance (Group) Co. climbed 3.1 percent to 44.48 yuan, rising from a three-month low.
UBS raised its ratings on China Life to “buy” from “neutral” and for Ping An to “neutral” from “sell.” The country’s “low life-insurance penetration rate” means there is high premium growth potential, while any improvement in the investment environment could boost earnings, UBS said in a note.
‘Good Opportunity’
“Stocks are cheap now relative to the current economic fundamentals,” said Zhang Kun, a strategist at Guotai Junan Securities Co. in Shanghai. “It’ll be a good opportunity to buy equities when the market stabilizes.”
The Shanghai gauge slumped 22 percent in August, the worst monthly performance since October, as banks reined in lending to avert asset bubbles and policy makers advised industries such as steel and cement to curb overcapacity. The decline stopped a rally that had sent the measure up 103 percent from a November low on prospects the government’s 4 trillion yuan ($586 billion) stimulus program and a record amount of new loans will ensure the economy grows at least 8 percent this year.
New loans plunged to 355.9 billion yuan ($52 billion) in July, less than a quarter of June’s level, and may slump to 200 billion yuan in August, the Beijing-based business magazine Caijing reported yesterday without citing anyone.
‘Deep Bubble’
The Shanghai Composite may fall another 25 percent as China’s economic recovery isn’t “sustainable,” former Morgan Stanley Asian economist Andy Xie said.
“The market is in deep bubble territory,” Xie, 49, who correctly predicted in April 2007 that China’s equities would tumble, said in an interview with Bloomberg Television yesterday.
Jiangxi Copper slid 3.9 percent to 31.99 yuan, extending a three-day, 14 percent loss. Zhongjin Gold slumped 5.7 percent to 47.17 yuan. Copper lost 4.2 percent yesterday, the most since June 22, while gold fell 0.6 percent, the biggest decline since Aug. 24.
The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.
Chongqing Changan Automobile Co. (000625 CH), the Chinese partner of Ford Motor Co. and Mazda Motor Corp., rose 2 percent to 9.43 yuan after saying it bought back 8.37 million so-called B-shares, which are denominated in Hong Kong dollars, from June 23 to Aug. 31, for a combined HK$30.8 million ($3.97 million).
Xi’an Aircraft International Corp. (000768 CH) slid 7.7 percent to 14.58 yuan after saying it plans to add 71.3 million yuan of investment to its unit in Tianjin that assembles wings for Airbus SAS A320 planes.
--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
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