Markets

Stocks rise for the first day in six

By Zhang Shidong and Irene Shen (China Daily)
Updated: 2010-12-30 10:45

SHANGHAI - China's stocks rose for the first time in six days, led by drugmakers and retailers, on speculation the benchmark index's recent declines were excessive relative to the outlook for earnings.

Shanghai Bailian Group Co, the listed unit of China's biggest retailer, and Suning Appliance Co advanced more than 2 percent on Wednesday. Yunnan Baiyao Group Co and Beijing Tongrentang Co, traditional medicine companies, paced a rebound for drugmakers, the worst performers in the past month.

A weekend interest-rate increase fueled concerns the government will take more measures to curb asset bubbles, contributing to the Shanghai Composite Index's five-day, 5.9 percent slide, the longest since July.

"The recent drop has already largely reflected the government's tightening," said Zhang Ling, a fund manager at Shanghai River Fund Management Co. "Stock valuations should be fair at this level and the decline should come to a halt now."

The Shanghai Composite Index added 0.68 percent to 2751.53 at the 3 pm close on Wednesday. The gauge now trades at 17.7 times reported earnings, compared with 32 times at the same time last year, according to weekly data compiled by Bloomberg. The CSI 300 Index gained 0.55 percent to 3061.83 on Wednesday.

The benchmark measure has fallen 16 percent in 2010, the worst performer among the world's 14 biggest stock indexes, according to data compiled by Bloomberg.

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The government has ordered banks to set aside more reserves six times this year and boosted rates twice to tame inflation and curb asset bubbles after record gains in lending and property prices.

The expansion in the Chinese economy will sustain earnings growth of as much as 22 percent next year, according to Morgan Stanley Huaxin strategist Zhao Lisong.

China's banking industry may have 800 billion yuan ($120.82 billion) in profit this year, the China Securities Journal reported, citing Yang Zaiping, vice chairman of the nation's banking association. A measure tracking healthcare stocks advanced 0.8 percent on the CSI 300. The gauge has fallen 12 percent over the past month, the most among the 10 industry groups.

Yunnan Baiyao rose 1.48 percent to 58.94 yuan on Wednesday. Beijing Tongrentang Co gained 3.17 percent to 32.20 yuan.

Suning, China's biggest home appliance retailer by market value, gained 2.3 percent to 12.90 yuan on Wednesday. Dashang Group Co climbed 2.49 percent to 47.01 yuan.

A measure of energy stocks slid 1 percent, the most among the CSI 300's 10 industry groups. Yanzhou Coal Mining Co slid 1.65 percent to 26.81 yuan. Jiangxi Copper Co, China's biggest producer of the metal, lost 1.51 percent to 40.56 yuan.

The government will place more emphasis on inflation controls and maintain "long-term, stable and relatively fast" economic growth, China National Radio reported on Tuesday, citing Vice-Premier Li Keqiang.

The central bank will raise rates two more times in the next six months to curb faster inflation, according to HSBC Holdings Plc. The benchmark one-year lending and deposit rates will rise by 25 basis points in each move, Qu Hongbin and Sun Junwei, economists at HSBC, wrote in a report.

Bloomberg News