Money

Shares extend gains as slowing home prices ease concerns over tightening

By Irene Shen and Zhang Shidong (China Daily)
Updated: 2011-03-02 10:16

SHANGHAI - Stocks on the Chinese mainland rose, extending the benchmark index's first monthly gain since October, as slowing growth in manufacturing and home prices eased concerns that the government will take more tightening measures to tame inflation.

Anhui Conch Cement Co surged to the highest in three years. Poly Real Estate Group Co gained the most in seven weeks after profit rose 40 percent last year. Industrial and Commercial Bank of China Ltd (ICBC) led gains for lenders.

The Purchasing Managers' Index (PMI) fell to 52.2 in February from 52.9 in January.

"The PMI shows the government's earlier tightening measures have proven effective," said Li Jun, a strategist at Central China Securities Co in Shanghai. "Some companies like property developers may rebound amid earnings growth."

The Shanghai Composite Index rose 0.47 percent to 2918.92 at the 3 pm close on Tuesday, extending a 4.1 percent gain last month. The CSI 300 Index added 0.47 percent to 3254.89, led by financial companies. The Shanghai gauge has advanced 3.95 percent this year.

The PMI fell for a third month, the China Federation of Logistics and Purchasing said on its website on Tuesday. That compared with 52.1 in a Bloomberg News survey.

"This is a good number, suggesting Beijing's policy tightening is starting to cool excessive growth and inflation," said Qu Hongbin, Hong Kong-based economist at HSBC Holdings Plc. The government "still needs to step up measures to combat inflation in the months ahead," he said.

Related readings:  Home price growth slowed in February  China's PMI drops to 6-month low in February  Home prices higher under new calculation scheme  China stocks close higher Tuesday

Anhui Conch extended gains to a fourth day, rising 2.6 percent to 35.51 yuan ($5.4), the highest since February 2008. Gansu Qilianshan Cement Group Co advanced 4.11 percent to 19.26 yuan. Tangshan Jidong Cement Co added 3.1 percent to 26.60 yuan.

Citigroup Inc increased its 2011 profit estimates for Anhui Conch by 45 percent to 9 billion yuan, saying cement prices in China may rise more than 10 percent this year as new projects spur demand growth to surpass supply.

Poly Real Estate climbed 3.48 percent to 12.80 yuan, the biggest gain since Jan 11.

China Vanke Co added 1.72 percent to 8.30 yuan. China Merchants Property Development Co gained 2.75 percent to 16.83 yuan.

ICBC climbed 0.23 percent to 4.27 yuan. China Construction Bank Corp added 0.62 percent to 4.85 yuan. Agricultural Bank of China Ltd rose 0.38 percent to 2.62 yuan.

HSBC Global Asset Management (UK) Ltd has been buying shares of the largest Chinese banks listed in Hong Kong.

"The market's been worrying about these things for quite a few quarters now," Nick Timberlake, global head of emerging-market equities at HSBC Global, said in an interview in Hong Kong on Tuesday. "You have four or five of the largest banks that are generating returns of mid-high teens and are trading at valuations of less than 1.5 times book value. For us, that's an attractive risk-reward so we've been adding to that sector in the last month or two."

Bloomberg News