China: Stocks rebound from biggest drop in six years on GDP data

[SHANGHAI] China's benchmark stock index rebounded from the biggest loss in six years, led by industrial and consumer companies, after data showed the nation's economy grew faster than estimated.

CSR Corp and China CNR Corp each soared 10 per cent to lead a rally for industrial companies. PetroChina Co jumped 3.4 per cent, rebounding from on Monday's 9.2 per cent plunge. Great Wall Motor Co surged 7 per cent to pace gains for consumer companies most reliant on economic growth. Citic Securities Co and Haitong Securities Co extended on Monday's slump, tumbling at least 8.8 per cent after they were suspended from loaning money to new equity-trading clients.

The Shanghai Composite Index rose 1.8 per cent to 3,173.05 at the close. Data showed gross domestic product rose 7.3 per cent in the three months ended December, beating the median estimate of 7.2 per cent, while industrial production and retail sales grew faster than anticipated. The Shanghai gauge slid 7.7 per cent on Monday as a tightening of margin-lending regulation sparked a US$291 billion rout in the country's equity market.

"The economic data were mostly better than market estimates, easing concern about deteriorating growth," said Wang Weijun, a strategist at Zheshang Securities Co in Shanghai. "We still need to closely watch the data on margin trading as that's a considerable source of new capital."

The CSI 300 Index climbed 1.2 per cent. Hong Kong's Hang Seng China Enterprises Index advanced 2.4 per cent. The Hang Seng Index added one per cent. Trading volumes in the Shanghai index were 20 per cent below the 30-day average, according to data compiled by Bloomberg.

CSRC Defense Even after on Monday's plunge, the Shanghai Composite is the best performer among 93 global indexes tracked by Bloomberg over the past year with a 59 per cent gain. The index is valued at 11.9 times 12-month projected earnings, compared with a multiple of 7.8 for the H-shares gauge.

China's securities regulator said on Monday it isn't trying to curb equity trading after its efforts to rein in record margin lending spurred the drop in stocks. Investors' interpretation that regulators are suppressing the stock market through Friday's action isn't accurate, China Securities Regulatory Commission spokesman Deng Ge said, according to a statement on the regulator's website.

Citic Securities, Haitong Securities and Guotai Junan Securities Co were suspended from lending money and stocks to new clients for three months, the China Securities Regulatory Commission said on its microblog on Jan 16 after the market closed. The regulator punished nine other brokerages for offenses including allowing unqualified investors to open margin finance and securities lending accounts, it said.

"The comments by the regulator on Monday night seem to have, to some degree, calm investors," said Gerry Alfonso, a China equity sales and trading director at Shenyin & Wanguo Securities Co.

on Tuesday's economic data suggest stimulus efforts have started to boost demand, helping full-year economic growth come close to the government's target. The central bank cut interest rates for the first time in two years in November and the government accelerated the approval of infrastructure projects to boost an economy mired in a property slump and overcapacity.

GDP expanded 7.4 per cent in 2014, the slowest pace since 1990 and in line with the government's target of about 7.5 per cent. Industrial production rose 7.9 per cent in December from a year earlier, compared with the 7.4 per cent median estimate of analysts. Retail sales increased 11.9 per cent, compared with the 11.7 per cent seen by economists.

A gauge of industrial companies in the Shanghai index rose 3.2 per cent for the biggest gain among the five groups. China Eastern Airlines Co climbed 3.9 per cent. China Railway Group Ltd advanced 4.3 per cent. Automakers led gains among consumer-discretionary shares, with SAIC Motor Corp adding 2.1 per cent.

Brokers Slump Financial companies were the only industry group in the CSI 300 to post a decline, dragged down by brokerages. Huatai Securities Co slid 8.4 per cent, paring a rally over the past year to 149 per cent.

Traders reduced holdings of Shanghai shares purchased with borrowed money on Monday by the most since June 2013. The outstanding balance of margin debt fell 1.9 per cent to 752 billion yuan (US$121 billion), according to data from the Shanghai Stock Exchange.

"People were panicking on Monday," Xiaomin Shen, Hong Kong-based portfolio manager at ICBC Credit Suisse Asset Management Co, said by phone. "Policy makers are pro-market and would like to see healthy growth of the market. The big trend for Chinese shares to rise stays intact."

BLOOMBERG