China Stocks Rebound From 2009 Low on Higher Railway Investment

China’s stocks rose, helping the benchmark index rebound from a three-year low, after the government said it will boost railway infrastructure investment and forecast economic growth will pick up in the second half.

CSR Corp. (601766) the nation’s biggest train maker, advanced the most in a week after the railway ministry increased its planned spending for this year by 9 percent. China Vanke Co. (000002) and Poly Real Estate Group Co., the largest developers, gained after a Shenzhen government agency said the city may allow individuals to borrow against their provident funds to buy first homes. Citic Securities Co. led a rally for brokerages after the Ministry of Commerce said China’s economy will gain momentum.

“Though the downtrend on the economy is continuing, we shouldn’t be totally bearish now as the government may announce additional stimulus plans at any time,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million. “If you sell now, you’ll probably miss the boat.”

The Shanghai Composite Index (SHCOMP) rose 0.6 percent to 2,161.19 at the close. It fell to the lowest level since March 2009 yesterday. The CSI 300 Index (SHSZ300) climbed 0.6 percent to 2,414.20. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 1.4 percent in New York yesterday.

The Shanghai Composite has fallen 12 percent from this year’s high on March 2 on concern an economic slowdown is deepening. The measure, down 1.7 percent in 2012, is valued at 9.6 times estimated profit, compared with the average multiple of 17.5 since Bloomberg began compiling the data in 2006.

Railway Investment

CSR, the nation’s biggest train maker, gained 1.2 percent to 4.35 yuan. China Railway Group Ltd. (601390), the largest construction company by total assets, climbed 2.3 percent to 2.62 yuan. China Railway Construction Corp., builder of more than half the nation’s rail links since 1949, added 3.1 percent to 4.65 yuan.

A document posted on the website of the National Development and Reform Commission’s Anhui branch indicates that the government increased its railway investment plan for the year by 9 percent from the previous 411.3 billion yuan ($64.5 billion). It cited the railways ministry for the information.

Full-year railway spending will be 448.3 billion yuan, according to the statement dated July 6. That indicates about 300 billion yuan of investment in the second half, up from about 148.7 billion yuan in the first.

“China’s stimulus may be stronger than the market has expected,” said Zhang Zhiwei, a Hong Kong-based economist for Nomura Holdings Inc. who formerly worked for the International Monetary Fund. “There will be more positive signs in the coming months to confirm that China’s pro-growth policies are taking effect.”

Housing Funds

Vanke, the nation’s biggest developer, gained 0.7 percent to 9.80 yuan. Poly Real Estate, the second biggest, climbed 0.9 percent to 12.38 yuan. China Merchants Property Development Co. (000024), the third largest, added 2.1 percent to 25.80 yuan.

Shenzhen may allow individuals to take loans against money in their public housing funds to buy first homes, according to a proposal posted on the Shenzhen Housing Provident Fund Management Center’s website yesterday. Individuals contribute money from salaries to their housing provident funds, which are held by the city.

A gauge of financial companies in the CSI 300 that includes banks and brokerages jumped 1.3 percent, the most among 10 industry groups. Citic Securities, the biggest listed-brokerage, advanced 2.6 percent to 12.82 yuan. Hong Yuan Securities Co. jumped 6.5 percent to 18.14 yuan.

Brokers Rally

China’s growth will pick up in the second half of the year, Shen Danyang, spokesman for the Ministry of Commerce, said in Beijing today. The trade surplus this year will exceed levels posted in 2011, he said. Foreign direct investment dropped 6.9 percent last month, the ministry said today. That’s the largest decline since December.

The IMF cut its forecast for China’s 2012 economic growth to 8 percent yesterday from 8.2 percent projected in April and the estimate for next year to 8.5 percent from 8.8 percent. The fund also lowered its 2013 global growth forecast to 3.9 percent from 4.1 percent.

China’s economy grew 7.6 percent in the second quarter, the least in three years, the statistics bureau said on July 13. It expanded 8.1 percent in the previous three months.

Kweichow Moutai Co. (600519) led a gauge of consumer-staples stocks in the CSI 300 to its biggest decline among industry groups on concern the economic slowdown will curb consumer spending. The measure slid 2 percent, trimming its gain to 12 percent in 2012.

Moutai, China’s biggest producer of baijiu liquor by market value, lost 3.2 percent to 253.76 yuan. Wuliangye Yibin, the second largest, fell 2.5 percent to 36.86 yuan. Jiangsu Yanghe Brewery Joint-Stock Co. (002340) retreated 3.2 percent to 148.63 yuan.

Thirty-day volatility in the Shanghai Composite was at 14.9 today, compared with this year’s average of 18. About 6.8 billion shares changed hands in the measure yesterday, 19 percent lower than the daily average this year. The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., fell 0.4 percent to $32.46 yesterday.