2010-07-08 10:33

SHANGHAI: Mainland stocks rose as consumer companies gained on speculation earnings will withstand a slowing economy, overshadowing losses by banks as Agricultural Bank of China Ltd (ABC) sought funds in what may be the world's largest initial public offering (IPO).

Appliance maker GD Midea Holding Co and Wuxi Little Swan Co climbed more than 5 percent after saying net income may have climbed in the first half. Huaxia Bank Co paced losses by lenders. ABC's IPO is raising $19.2 billion, according to people with knowledge of the pricing for Hong Kong and Shanghai. Industrial & Commercial Bank of China Ltd (ICBC) declined after Ming Pao Daily News said the lender plans a rights offer.

"Consumer stocks are less exposed to the economy in terms of profitability and offer a good hedge against a slowdown," said Zheng Tuo, president of Shanghai Good Hope Equity Investment Management Co. "Fundraisings by the big banks introduce a lot of supply at a time when sentiment is weak."

The Shanghai Composite Index, Asia's worst performer this year, added 11.69, or 0.5 percent, to close at 2421.12, after changing direction at least 10 times. The measure rallied 1.9 percent on Tuesday on speculation losses were excessive as valuations fell to the lowest relative to earnings in 18 months.

The CSI 300 Index, tracking yuan-denominated A-shares in Shanghai and Shenzhen, gained 0.7 percent to 2580.48 on Wednesday, led by a measure tracking consumer discretionary stocks.

China's national pension fund bought more than 2 billion yuan ($295 million) of A-shares recently, the Securities Times reported on Wednesday, citing unidentified people familiar with the situation and without giving a timeframe.

Around 54 percent of A-share companies' first-half guidance indicate year-on-year net income growth of more than 50 percent, UBS AG's Hong Kong-based strategist John Tang wrote in a report on Tuesday.

ICBC, the nation's biggest bank, slipped 0.5 percent to 4.12 yuan. The bank plans to raise as much as 45 billion yuan in a rights offer, Hong Kong-based Ming Pao Daily News said. A Beijing-based press official from ICBC, who didn't want to be identified, declined to comment.

"Banks have been ignoring the weak market sentiment and keep announcing big fundraising plans," said Wei Wei, an analyst at West China Securities Co in Shanghai.

Kenneth Rogoff, the Harvard University professor, said on Tuesday China's property market is beginning a "collapse" that will hit the nation's banking system. Home prices are set to fall as much as 20 percent in a "healthy" correction, Michael Klibaner, head of China research at Jones Lang LaSalle Inc, said on Wednesday.

Authorities intensified a crackdown on property speculation after announcing the economy expanded at an 11.9 percent annual pace in the first quarter, the most since 2007.

The People's Bank of China (PBOC) signaled it remains focused on reining in liquidity and stemming inflation.

A surfeit of cash is still the main problem facing monetary policy, and PBOC should at an appropriate time use interest rates to address it, Yang Guozhong, director of the bank's business management department, wrote in China Finance magazine.

Investors opened 5.1 percent fewer accounts to trade Chinese stocks during the week ended July 2 as compared with a week earlier, according to the China Securities Depository and Clearing Corp. Investors opened 277,833 accounts during the week, according to the clearing house.

Hang Seng declines

Hong Kong stocks dropped as US service industries expanded more slowly than estimated and after a Chinese government official said the world's fastest-growing major economy is facing increasing uncertainties.

The Hang Seng Index dropped 1.1 percent to close at 19857.07, its fifth decline in six days. The gauge has fallen 9.2 percent this year as worries about budget deficits in Europe and tighter monetary policy in China dented confidence in the strength of the global economy. The Hang Seng China Enterprises Index decreased 1.3 percent to 11305.18.

Bloomberg News