Benchmark index up most in four weeks as investors seek bargains

SHANGHAI - Stocks on the Chinese mainland gained the most in four weeks on Sept 21. The advance came after a gauge of economic indicators showed growth is withstanding Europe's debt crisis and faltering expansion in the United States.

"The worst period for the economy and inflation has passed," said Mei Luwu, a fund manager at Lion Fund Management Co, which oversees more than $7.8 billion. "Valuations have reached a bottom, leaving limited room for further declines."

The benchmark Shanghai Composite Index jumped 2.7 percent to 2,512.96, the biggest advance since Aug 25. Stocks on the measure trade at 11.6 times estimated profit. Valuations dropped to the lowest level on record this week, according to data compiled by Bloomberg. The CSI 300 Index rose 3 percent to 2,771.01.

The Shanghai index has slumped 11 percent in 2011 as the government increased measures to cool inflation that's at an almost three-year high.

Energy stocks led the gain on Sept 21. PetroChina Co, the nation's largest oil producer, added 1.5 percent to 9.77 yuan ($1.53). China Shenhua Energy Co rose 4.9 percent to 26.59 yuan.

The Conference Board Leading Economic Index for China, a composite measure of key economic indicators, rose 0.6 percent in July. The index, released by the Conference Board, a US research company, is designed to capture prospects over the coming six months.

The index "signals a continuation of economic expansion through the end of this year", said Jing Sima, the board's New York-based economist, in a statement. "The rate of economic growth will be slower in 2011 than last year."

On Sept 20, the International Monetary Fund (IMF) cut its forecast for global growth and said "downside risks are growing" as Europe's debt crisis widens. The Washington-based lender also lowered its estimate for the Chinese mainland's expansion because of monetary tightening and a weaker outlook for exports.

The IMF estimates that the mainland economy will grow 9.5 percent this year, down from a forecast of 9.6 percent in June, and by 9 percent in 2012. The fund lowered its estimate for world growth this year to 4 percent from the previous forecast of 4.3 percent.

Industrial companies climbed 3.1 percent on Sept 20. Dongfang Electric Corp surged 7.1 percent to 23.05 yuan, its biggest gain since Jan 27. Shanghai Electric Group Co jumped 8.5 percent to 6.13 yuan. China First Heavy Industries Co, the maker of equipment used in mining and energy industries, rose 9.9 percent to 3.98 yuan.

Nuclear power-related companies jumped, after the China Securities Journal said the government may resume approvals for nuclear power projects.

New projects will be required to use reactor technology offered by Westinghouse Electric Corp and Areva SA under China's nuclear safety plan, which may be out to seek public opinion at the end of this year, China Securities Journal reported on Sept 21, citing unidentified people.

Offshore Oil Engineering Co and China Oilfield Services Ltd jumped by the daily maximum of 10 percent.

Bloomberg News