July 22 (Bloomberg) -- Chinese investors are rushing to buy into the world’s second best-performing stock market following the end of a ban on initial public offerings and a rebound in economic growth.
Individual investors opened 484,799 stock accounts last week, data from the nation’s clearing house showed today, the most since the five days ended Jan. 25, 2008, and almost five times this year’s low in January. The Shanghai Composite Index rose the most today in six weeks to the highest since June 2008.
“The prospect of making quick bucks in the stock market is luring retail investors,” Liu Xiangning, a Shenzhen-based strategist at United Securities Co., said by telephone.
The Shanghai Composite has risen 81 percent this year, trailing only Peru’s benchmark, as lending tripled to a record 7.37 trillion yuan ($1.1 trillion) after China unveiled a $585 billion stimulus package. Gross domestic product expanded 7.9 percent in the second quarter, the statistics bureau said last week, accelerating from the weakest pace in almost a decade.
The benchmark index rose 83.41, or 2.6 percent, to 3,296.62 at the close today, paced by energy producers.
China Petroleum & Chemical Corp., also known as Sinopec, jumped the daily 10 percent limit, the most in four years, after Nomura Holdings Inc. said first-half profit at the oil refiner may more than triple. PetroChina Co., the nation’s biggest oil company, added 5.3 percent, while China Shenhua Energy Co. surged 4.5 percent. The three stocks accounted for more than half the benchmark index’s gain today.
“The market has high hopes of an economic recovery which will boost demand for energy,” said Wang Zheng, a fund manager at Jingxi Investment Management Co. in Shanghai.
‘Straight Up’
China will sustain growth because it can cut interest rates or trim income taxes to spur consumer spending, Invesco Asia Ltd. fund manager Samantha Ho, who manages $3 billion in Chinese equities, said in an interview yesterday in New York.
Still, the rally has made Chinese stocks the most expensive since January 2008, Bloomberg data shows. Shares traded on the Shanghai index are valued at 36 times earnings, almost triple a November low of 12.9 times.
“I don’t like buying when things are going straight up and China has been going straight up for nine months,” Jim Rogers, chairman of Rogers Holdings and the author of books including “Investment Biker” and “Adventure Capitalist,” said in a Bloomberg Television interview in Singapore today.
The nation’s stock market may have “gotten ahead of itself,” he said.
Debut Gains
China lifted a nine-month moratorium on initial stock sales this month as the securities regulator revived stock sales after tweaking pricing guidelines to combat excessive first-day gains.
Your-Mart Co., a Chinese retailer, surged 94 percent from its offer price on its trading debut in Shenzhen last week, following similar gains in shares of Zhejiang Wanma Cable Co. and Guilin Sanjin Pharmaceutical Co. They are the first three companies to go public since the securities regulator halted sales in September following a stock market rout.
The Shanghai Composite slumped last year as the global recession curbed demand for the country’s exports and industrial production shrank. The gauge doubled in both 2006 and 2007, luring more than 300,000 investors to open new accounts daily at the height of the rally.
The Shanghai Composite, which has almost doubled from its Nov. 4 low, is still 59 percent below its peak on Oct. 16, 2007. The measure tumbled by a record 65 percent last year, data compiled by Bloomberg show.
Valuation
At the peak in October 2007, the benchmark index traded at 48.7 times profit, 35 percent higher than today’s valuation, data compiled by Bloomberg show.
This year’s rally in stocks may be tested by China State Construction Engineering Corp.’s plans to raise as much as 50.2 billion yuan in the world’s biggest IPO since March 2008.
Individual investors account for 67 percent of market turnover and ownership, Alan Landau, president of Marco Polo Investments Ltd. said in May.
An average of 25.72 billion shares have been traded daily on the Shanghai and Shenzhen stock exchanges so far in July, almost triple the 9.96 billion a year earlier.
