China’s Benchmark Stock Index Gains as Oil Shares Rise on Libya

China’s benchmark stock-index rose as energy companies gained on higher oil prices, outweighing declines by copper producers amid concern tightening measures will slow economic growth.

PetroChina Co. and China Coal Energy Co. climbed as crude futures jumped after the U.S., U.K. and France launched airstrikes at targets in Libya. Dongfang Electric Corp. led a rebound for power-equipment stocks after Citigroup Inc. cited the company as saying nuclear-equipment sales this year will be intact. Jiangxi Copper Co., the biggest copper producer, slid to the lowest in a month after the central bank ordered banks to set aside more cash for a third time this year to slow inflation.

“The reserve-requirement move is within expectations,” said Wu Kan, a fund manager at Dazhong Insurance Co., which oversees $285 million. “In the short term, there probably won’t be any further tightening measures and that’ll spur a rally after last week’s drop.”

The Shanghai Composite Index added 2.25, or 0.1 percent, to 2,909.14 at the 3 p.m. close, after changing direction more than 10 times. About five stocks fell for every four that rose. The gauge trades at 13.7 times estimated earnings, compared with around 16 times at the end of last year. The CSI 300 Index (SHSZ300) slipped 0.3 percent to 3,207.11 today.

The Shanghai Composite has gained 3.6 percent this year on optimism the world’s second-biggest economy will withstand tighter monetary policies. Besides boosting reserve requirements, the central bank has raised interest rates three times since the start of 2010 to cool inflation that reached 4.9 percent in February, exceeding the government’s 4 percent annual target.

Crude Oil

PetroChina, the nation’s biggest oil producer, added 1.6 percent to 11.75 yuan. PetroChina and Saudi Arabian Oil Co., known as Aramco, agreed to build a refinery in Yunnan province, the state oil company of Saudi Arabia said yesterday.

China Coal, the nation’s second-largest coal producer, climbed 0.5 percent to 11.25 yuan. Shanxi Coking Co., the largest publicly traded coke producer in China, gained 2.2 percent to 10.28 yuan.

Crude oil for April delivery gained as much as $2.28, or 2.3 percent to $103.35 a barrel in after-hours trading in New York today. Libyan leader Muammar Qaddafi vowed to repel two days of attacks by missiles and warplanes against military installations.

Libya holds the largest proven oil reserves in Africa, with 44.3 billion barrels in 2009, the BP Statistical Review of World Energy shows. The nation’s crude output has fallen to a quarter of the production before the crisis, and may stop, according to the chairman of the national oil company. Bahrain Petroleum Co. employees went on strike last week in response to a police crackdown on anti-government demonstrations, while Yemen declared a state of emergency.

‘Largely Intact’

Dongfang Electric, which derived 6.5 percent of sales from nuclear power-related products in 2009, added 1.2 percent to 29.23 yuan. The company said in a March 18 conference call revenue from its nuclear-equipment sales in 2011-2012 will be “largely intact,” Pierre Lau and Maggie Mok, analysts at Citigroup, said in a note to clients.

The stock slumped 15 percent last week after the Chinese government announced it would suspend approvals of all new nuclear projects after the Japanese radiation leakage. Progress is being made in restoring power to the No. 1 and No. 2 reactors at the Fukushima nuclear complex, the Japanese government said today.

Shanghai Electric Group Co., a manufacturer of nuclear- power equipment, added 1.5 percent to 8.13 yuan after sliding 9.4 percent last week.

Reserve Requirement

The People’s Bank of China said March 18 after the market close that banks’ reserve requirements will increase half a percentage point. The move may lock up about 350 billion yuan ($53 billion), according to Australia & New Zealand Banking Group.

Jiangxi Copper, China’s biggest producer of the metal, slid 0.8 percent to 38.93 yuan, the lowest since Feb. 11. Tongling Nonferrous Metals Group Co., the second largest, fell 1 percent to 28.16 yuan.

Copper for June-delivery on the Shanghai Futures Exchange fell as much as 0.7 percent to 71,310 yuan a metric ton. Futures on the Comex in New York dropped for a second day, losing as much as 0.3 percent to $4.325 a pound.

A gauge of financial stocks in the CSI 300 rose 0.3 percent today, the most among the 10 industry groups. China Merchants Bank Co. advanced 1 percent to 13.55 yuan. Poly Real Estate Group Co., China’s second-largest developer by market value, rose 1 percent to 12.79 yuan.

“The increase in the reserve ratio probably weakened expectations interest rates will rise, supporting property stocks,” said Zhao Duo, an analyst at Sealand Securities Co. in Shenzhen.

Trailing Estimates

Kweichow Moutai Co., China’s biggest producer of baijiu liquor by market value, dropped 2.1 percent to 187.13 yuan, the biggest decline since Jan. 24. Net income for 2010 gained 17 percent to 5.05 billion yuan. That compared with the average 5.2 billion yuan of 11 analyst estimates compiled by Bloomberg. Profit margins were squeezed by rising competition and higher raw material costs. Rival Wuliangye Yibin Co. slid 1.8 percent to 32.40 yuan.

(Source: http://www.bloomberg.com/news/2011-03-21/china-s-stocks-rise-for-second-day-as-energy-producers-rally-on-oil-gains.html)