China's Stocks Rise to 3-Month High on Economic Plan

China’s stocks rose to the highest in more than three months, led by consumer and energy companies, after the government said domestic consumption will drive economic growth and crude oil prices topped $100 a barrel.

Gree Electric Appliances Inc. and Qingdao Haier Co., the country’s biggest maker of air conditioners and refrigerators, gained more than 4 percent after Premier Wen Jiabao said incentives for rural purchases of home appliances may boost spending. PetroChina Co. and China Shenhua Energy Co., the largest producers of oil and coal, advanced after oil prices surged amid unrest in Libya.

“There will be active investment and construction activities at the beginning of the five-year plan,” said Victoria Mio, a Hong Kong-based portfolio manager at Robeco Hong Kong Ltd., whose parent oversees $200 billion. “The A-share market has a window of opportunity for a rebound.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, gained 26.50, or 0.9 percent, to 2,968.81 as of 9:42 a.m. local time, the highest since Nov. 15. It rose 2.2 percent last week. The CSI 300 Index （SHSZ300） rose 1.2 percent to 3,309.79.

The Shanghai gauge has advanced 4.8 percent this year, after plunging 14 percent in 2010, on signs the world’s second- biggest economy is withstanding tightening measures. The central bank has boosted banks’ reserve requirement ratio eight times since the start of 2010, while raising interest rates three times to rein in inflation that reached 4.9 percent in January, near the 28-month high of 5.1 percent in November.

Economic Plan

Gree Electric, China’s largest maker of home air- conditioners, jumped 4.9 percent to 22.65 yuan. Qingdao Haier, the air-conditioner and refrigerator unit of China’s biggest appliance maker, gained 4.1 percent to 31 yuan. Appliance maker GD Midea Holding Co. rose 2.8 percent to 20.99 yuan.

The government will target 8 percent economic growth this year and “decisively” curb increases in prices that may threaten social stability, Wen said in his state-of-the-nation report on the opening session of the National People’s Congress over the weekend.

“We cannot allow price rises to affect the normal lives of low-income people,” Wen said in a report in Beijing. He confirmed a goal of holding inflation to 4 percent for the full year. Growing the country’s domestic demand is also a key part of the nation’s strategic plan, Wen said.

The premier had already disclosed an annual growth target of 7 percent for the nation’s five-year plan, running from 2011 to 2015, down from the previous 7.5 percent. The goals are routinely surpassed, with China’s economy expanding an average 11 percent over the past five years, adding jobs and boosting incomes.

Technology Outlook

China’s plans to boost domestic consumption and invest more in underdeveloped industries including technology in the next five years will boost the nation’s stock market, according to Robeco.

Consumer, alternative energy, agriculture, Internet and software companies will benefit most from government efforts to cut the economy’s dependence on exports, said Mio. Investors should avoid shippers, export-oriented companies and railway construction stocks, she said.

China Banking Regulatory Commission Chairman Liu Mingkang said the amount of new loans this year will be about equal to last year, the China Business News reported today.

China Minsheng Banking Corp., the nation’s first privately owned bank, rose 2.4 percent to 5.48 yuan. China Merchants Bank Co. advanced 1.8 percent to 14.48 yuan.

（Bloomberg）