(Bloomberg) -- China’s stocks rose, led by energy companies after Offshore Oil Engineering Co. reported a jump in profit. A gauge of small-company shares headed for a record.
Offshore Oil, a unit of Cnooc Ltd., surged 9.9% after saying earnings probably climbed 220% last year. Poly Real Estate Group Co. led gains for developers, rising 2.5% after reporting a 46% jump in contracted sales last month. Huayi Brothers Media Corp. rallied 3.7%, helping to send the ChiNext small-cap index towards the highest level since it was introduced in June 2010.
The Shanghai Composite Index added 0.4% to 2,051.60 at the 11:30 a.m. break, while the ChiNext, dominated by private companies in nascent industries such as technology and health care, rose 0.9%. The Shanghai index is valued at 7.7 times projected 12-month earnings, compared with a multiple of 34 for the ChiNext, according to data compiled by Bloomberg.
“In my recent discussions with fund managers, all top performing funds are buying the ChiNext heavily and participating in the upcoming IPOs,” said Hao Hong, chief China strategist at Bocom International Holdings Co. in Hong Kong. “They are also shorting the main board as a hedge. I think this strategy will continue to shine this year.”
The China Securities Regulatory Commission approved 12 IPOs yesterday, bringing the total number to 50. China, the world’s largest IPO market in 2010, with a record $71 billion raised, hasn’t had an IPO since October 2012 as the securities regulator cracked down on fraud and misconduct among advisers and companies.
ChiNext RALLY
The ChiNext has rebounded 18% from a December low, with gains accelerating this week after the government started allowing insurers to invest in companies in the index. The measure jumped 83% last year, spurred by the government’s efforts to transform the economy to one reliant on domestic consumption and innovation from government-led investment.
The CSI 300 Index added 0.5% to 2,252.31 today. The Hang Seng China Enterprises Index slid 0.1%. The Bloomberg China-US Equity Index rose 0.8% yesterday as Qihoo 360 Technology Co. jumped to a two-month high amid speculation Alibaba Group Holding Ltd. may invest in the Internet company.
China’s consumer-price index rose 2.5% last month, a government report today showed, compared with a 2.7% median estimate of 41 analysts surveyed by Bloomberg News. The producer-price index fell 1.4%, the 22nd straight drop.
“The CPI and PPI data are unlikely to move the market much today -- it’s not like we expected the economy to be superb now with restructuring,” said Mao Sheng, an analyst at Huaxi Securities Co. in Chengdu. “Still, I am positive about the first quarter. Companies with good earnings news such as Offshore Oil Engineering today will stand to benefit.”
INFLATION, TRADE
Premier Li Keqiang is trying to keep consumer-price gains within targets as the government starts implementing the broadest economic-policy reforms since the 1990s, unveiled after a Communist Party summit last month. The government’s inflation target was 3.5% last year. China may set a 2014 target of 4%, the China Securities Journal said Dec. 31.
The government is expected to release trade data for December tomorrow. Export growth probably slowed to 5% last month from 12.7% a month earlier, according to the median estimate of 39 economists surveyed by Bloomberg.
“We expect export growth to moderate from November’s surge on weaker momentum and a high base,” Chang Jian, a Hong Kong- based economist at Barclays Plc, wrote in a note. “The regulator’s recent crackdown on fake trade financing could also weigh on export growth.”
U.S. SHARES
The Shanghai index had dropped 3.4% this year through yesterday, extending 2013’s 6.75% decline, amid concern slowing economic growth will curb profits. Trading volumes were 25% lower than the 30-day average today, according to data compiled by Bloomberg.
The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., added 1.2% yesterday. The Standard & Poor’s 500 Index was little changed after minutes from the Federal Reserve showed officials expressed concern about risks to financial stability.
Qihoo jumped to $89, the highest since Nov. 13. Marbridge said negotiations between Qihoo and Hangzhou, China-based Alibaba have been under way “for a significant period of time,” citing Lieyunwang.com, a Chinese blog focusing on the information technology and Internet industries.
China’s three largest Internet companies, Alibaba, Shenzhen-based Tencent Holdings Ltd. and Beijing-based Baidu, announced $3.5 billion of acquisitions last year to cash in on the 591 million Internet users in the country. Alibaba, which may be headed toward the biggest initial public offering since Facebook Inc., teamed up with Qihoo in May to start e-commerce search engine 360.etao.com to compete with Baidu.
