China's stocks rose on Wednesday for the third time in four days as speculation that the government will introduce measures to bolster equities overshadowed concerns that the country's slowing economy will hurt profits.
Aluminum Corp of China Ltd, whose parent company took over rare earth companies, jumped 10 percent after China Central Television reported the government will increase penalties for excess rare earth production and encourage the formation of large producers.
China Cosco Holdings Co gained 2.9 percent after a measure of shipping rates advanced. PetroChina Co fell 1.1 percent after Mirae Asset Securities Co said the oil producer may post a "disappointing" decline in net income.
The Shanghai Composite Index rose 1.36 point, or 0.1 percent, to 2,378.20. The measure climbed 0.8 percent after the 21st Century Business Herald reported that as much as 40 percent of Guangdong province's 100 billion yuan ($15.8 billion) in pension funds might be invested in stocks.
The index later fell as much as 0.7 percent after the government said the money will "mainly" be invested in bonds.
"The pension fund news is a long-term positive boost for the market," said Wei Wei, an analyst at West China Securities Co in Shanghai. "That means the government has opened the flood gates for more local pensions to enter the stock market. There are expectations that more support measures will follow."
The Shanghai Composite has rebounded 8.1 percent this year on expectations the central bank will take measures to boost economic growth, including cuts in lenders' reserve-requirement ratios.
The National Council for Social Security Fund will manage Guangdong's pension funds, the government agency said on Tuesday. The national pension fund denied media reports about investing Guangdong's pension funds in the stock market, according to a statement on its website on Wednesday.
It will invest the money "mainly" in government and corporate bonds and other fixed-income securities, and deposit the money in banks, according to the statement.
"Cyclical stocks, like Chalco, usually react quickly if the market has increasing capital," said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co, which oversees $285 million. "News that the government will regulate rare-earth mining also fuels speculation that such measures will benefit large producers."
Chalco surged 10 percent to 7.59 yuan. Its parent, Aluminum Corp of China Ltd, took over five rare-earth companies in Jiangsu province to boost capacity in June.
China will increase punishment for rare-earth over-production, China Central Television reported on Tuesday.
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