China stocks rise as production grows
Equipment makers surge amid expectations for investment growth and liquor firms fall after distiller sees slowest profit growth in four years
Most mainland stocks rose yesterday after an official report showed manufacturing strengthened last month, with machinery companies Zoomlion Heavy Industry Science and Technology and Sany Heavy Industry surging more than 5 per cent.
About five stocks rose for every four that fell on the Shanghai Composite Index, which was little changed at 2,098.45 at the close, after the central government's purchasing managers' index climbed to a 16-month high of 51 last month from 50.3 in July.
"The recent economic data has been good," said Mao Sheng, an analyst for Huaxi Securities in Chengdu.
Trading volumes in the Shanghai index were 40 per cent higher than the 30-day average. It rallied 5.3 per cent last month, as reports ranging from industrial production to money supply signalled a stabilising economy.
China's economy is strengthening after a two-quarter slowdown, as new factory orders jumped and overseas demand rebounded. Improvement in manufacturing may bolster confidence that the economy is responding to Premier Li Keqiang's policies to support growth amid a crackdown on shadow banking aimed at curbing financial risks.
JPMorgan Chase yesterday joined Deutsche Bank and Credit Suisse in raising estimates for an increase in gross domestic product, citing strength in infrastructure and real estate, and a pick-up in exports.
Shares of Zoomlion, China's second-largest maker of construction equipment, jumped 8.1 per cent to 5.74 yuan after falling 42 per cent since the start of the year. Bigger rival Sany Heavy climbed 5.3 per cent to 7.60 yuan after a 32 per cent decline since the start of the year.
"There's expectation there will be more investment in machinery in the second half and the industry is further boosted by the PMI data too," said Han Weiqi, an analyst at Capital Securities. Machinery stocks "had fallen a lot this year and now it's their turn for a stocks rotation", Han said.
A gauge of consumer-staples producers in the CSI 300 index slid 1.5 per cent, the most among 10 industry groups, with Kweichow Moutai, the nation's biggest liquor maker by market value, plunging 10 per cent to 151.92 yuan after reporting the slowest profit growth for a six-month period since 2009. Its first-half net income rose 3.6 per cent to 7.25 billion yuan, trailing Capital Securities' estimate for 10 per cent growth.
"With strict controls on government purchases of expensive liquor, they are not going to get a boost in sales for the second half of the year," said Liu Hui, an analyst at the brokerage.
Wuliangye Yibin, the second-biggest baijiu maker, dropped 5.4 per cent to 18.33 yuan.
The Communist Party's new leadership pledged in December to reduce lavish receptions and live more frugally.