Stocks rise on higher metal prices
China's stocks rose, rebounding from the biggest drop in nine months, as commodities suppliers such as Aluminum Corp of China Ltd gained after metals prices rose and power producers advanced on better earnings prospects.
The Shanghai Composite Index rose 40.25, or 1.4 percent, to 2910.88 at the close after changing direction at least 10 times. The gauge has slid 16 percent from this year's high on Aug 4 on concern a slump in exports and new loans will damp economic growth. The gauge remains 60 percent higher this year.
"We are probably not so far away from a reasonable valuation territory, if you are optimistic in terms of the third- and fourth-quarter earnings," said Gabriel Gondard, deputy chief investment officer at Fortune SGAM Fund Management Co.
The Shanghai index trades at 31 times the reported profit of its companies, compared with a price-to-earnings ratio of 17 times for the MSCI Emerging Markets Index.
Aluminum Corp of China, the nation's biggest aluminum maker, gained 4.2 percent to 15.66 yuan. Aluminum advanced after United Co Rusal, the world's biggest producer, said it could lose at least 500,000 tons of output following an accident. London aluminum jumped as much as 3.3 percent to $2,025 a ton.
Jiangxi Copper, China's biggest producer of the metal, rose 3.1 percent to 38.52 yuan. Tongling Nonferrous Metals Group Co, the No 2, added 2.2 percent to 18.96 yuan. Copper for November delivery on the Shanghai Futures Exchange added as much as 1.3 percent.
GD Power, the largest electricity producer in northeastern China, gained 3.4 percent to 7.09 yuan after saying profit rose 96 percent to 644.6 million yuan.
Huaneng Power International Inc, the listed unit of China's largest power group, added 4.8 percent to 8.28 yuan. Datang International Power Generation Co, a unit of China's second-biggest electricity producer, jumped the 10 percent daily limit to 10.68 yuan.
The Shanghai index may fall another 10 percent as bank lending slows, said Andy Xie, a former Morgan Stanley chief Asian economist.
"The current correction is reflecting the tightening in lending," said Xie, who correctly predicted in April 2007 that China's equities would tumble. "We have seen the peak of this market cycle, though there is likely to be a bounce as the government seeks to stabilize the market."
