Money

Benchmark gains most in 3 months

By Irene Shen (China Daily)
Updated: 2011-06-24 10:57

A Sany Heavy Industry Co booth at an expo in Guangzhou, Guangdong province. The company's shares rose 3.3 percent to 17.67 yuan ($2.73) on Thursday, the highest since May 11. [Photo / China Daily]

Coal and material makers, notably in cement, among biggest gainers

SHANGHAI - Stocks on the Chinese mainland advanced, driving the benchmark index to its biggest gain in three months, as energy and material producers rallied on increased government support for alternative energy production and affordable housing.

Anhui Conch Cement Co and Sany Heavy Industry Co surged more than three percent after China Business News reported the government may release a five-year development plan for the construction machinery industry and this newspaper said the nation will invest 400 billion yuan for hydroelectric dams. China Shenhua Energy Co and Yanzhou Coal Mining Co led an advance for coal shares on China's plan to build coal-fired power plants.

"Material producers especially the cement makers are going to be hot picks for the second half because of government investment," said Tu Jun, a strategist at Shanghai Securities Co. "The macro investment is going to boost earnings."

Related readings:  Stocks continue to regain ground  China to prioritize hydropower  Big players cement their lead as demand increases  Coal and property fuel private-capital boom

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, added 38.93 points, to 2688.25 at the 3 pm close, the most since March 7. The CSI 300 Index gained 1.7 percent to 2957.63. The Shanghai index has lost 4.3 percent this year, dragging down average estimated price earnings to 12.5 times from 15.9 times at the end of 2010.

The Shanghai gauge has slumped 12 percent from this year's high on April 18 on concern government measures to cool inflation will slow economic growth. The central bank has raised reserve requirements 12 times and interest rates four times since the start of last year.

Anhui Conch, China's biggest cement producer, advanced 4.6 percent to 27.59 yuan ($4.26), the highest since April 13. Huaxin Cement Co jumped 5.7 percent to 25.57 yuan. Sany Heavy rose 3.3 percent to 17.67 yuan, the highest since May 11. Changsha Zoomlion Heavy Industry Science and Technology Development Co added 3.3 percent to 15.25 yuan.

China may release a development plan for the construction machinery industry in July, China Business News reported, citing Su Zimeng, secretary-general for the China Construction Machinery Association. Su said he expects sales for the industry will have an average annual growth of 17 percent in the five years through 2015, the report said.

The nation will invest 400 billion yuan in the construction of four hydroelectric dams on a tributary of the Yangtze River to help boost the share of non-fossil fuels in the energy consumed by the nation, China Daily reported on Thursday, citing Han Wenke, director of the Energy Research Center at the National Development and Reform Commission.

Separately, the Beijing government will support the sale of 50 billion yuan of corporate bonds by property developers to fund the construction of affordable housing, the Securities Times reported on Wednesday, citing Zhang Guilin, president of Beijing Zhuzong Group Co.

China Shenhua, the biggest coal producer, added 2.9 percent to 29.62 yuan. Yanzhou Coal rose 1.8 percent to 34.41 yuan.

China plans to build 250 gigawatts of coal-fired power plants between 2011 and 2015, Wu Xianfeng, director of emissions control at the Ministry of Environmental Protection, said at a conference in Beijing on Thursday.

Sinovel Wind Group Co, the largest wind-turbine maker, surged 6.3 percent to 29.26 yuan. Xinjiang Goldwind Science & Technology Co climbed 2 percent to 14.72 yuan.

China will increase offshore wind power installed capacity to five gigawatts by 2015 and 30 gigawatts by 2020, Xinhua reported, citing the National Energy Administration at a meeting in Jiangsu province. Public tender for the second round of offshore wind power concession projects with a total installed capacity of up to 2 gigawatts will be completed during the first half of 2012, according to the report.

The increased investment in energy and affordable housing comes as a preliminary purchasing managers' index showed that manufacturing may expand at the slowest pace in 11 months in June. The 50.1 level reported by HSBC Holdings Plc and Markit Economics on Thursday compares with a final reading of 51.6 in May. A number above 50 indicates expansion.

The recent tumble in China's stocks is a buying opportunity because investors are "overly pessimistic" about China's economic outlook, according to Allianz Global Investors Capital.

"China's stock market has underperformed compared with the rest of the world, giving us opportunities to buy some companies at much lower multiples," Horacio Valeiras, chief investment officer at the company in San Diego, said in an interview in Taipei on Wednesday. The US Standard & Poor's Index has gained 2.3 percent this year.

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