Equities gain as CPI data reassures investors

SHANGHAI - Stocks on the Chinese mainland rose for the first time in three days after the country's inflation cooled to the slowest pace in five months, giving policymakers more room to support economic growth.

Industrial & Commercial Bank of China Ltd (ICBC) led gains for lenders as the statistics bureau said consumer prices rose 5.5 percent in October from a year earlier. PetroChina Co and Jiangxi Copper Co paced gains by commodity producers after oil and metal prices climbed.

"This is the third month of CPI easing, so investors are now more assured that the trend will continue for the rest of the year," said Larry Wan, Beijing-based head of investment at Union Life Asset Management Co, which manages the equivalent of $2.2 billion. "We are now also confident there will be easing by the government. The only disagreement among investors is the magnitude of easing."

The Shanghai Composite Index rose 0.8 percent to 2524.92, erasing an earlier 0.6 percent decline. The CSI 300 Index added 0.9 percent to 2751.65.

ICBC, the nation's biggest lender, gained 0.7 percent to 4.36 yuan. China Life Insurance Co rose 2.8 percent to 18.19 yuan.

The 5.5 percent increase in consumer prices matched the median forecast in a Bloomberg News survey and compared with a 6.1 percent gain in September. Producer prices rose 5 percent last month, less than any of 24 analysts forecast.

Industrial production in the world's second-largest economy increased 13.2 percent in October, compared with 13.8 percent in September and the 13.4 percent estimate in a Bloomberg survey of analysts.

Jiangxi Copper rose 1.5 percent to 28.32 yuan. PetroChina increased 0.6 percent to 10.19 yuan.

Crude oil for December delivery gained as much as 52 US cents to $97.32 a barrel in New York. Copper for three-month delivery rallied as much as 2.1 percent to $7,959.75 a metric ton on the London Metals Exchange. Nickel added 1.1 percent and tin climbed 0.9 percent.

Beijing Capital Development Co lost 1.7 percent to 8.15 yuan and Poly Real Estate Group Ltd declined 0.2 percent to 9.83 yuan.

Housing prices will fall after China's two-year effort to regulate private construction and increase the building of welfare housing, Premier Wen Jiabao said in a Xinhua News Agency report. Barclays Capital estimates home prices may decrease by 10 to 30 percent in the next year.

The Shanghai Composite has fallen 10 percent this year after the central bank raised interest rates three times and lifted the reserve-requirement ratio to curb inflation that's near a three-year high. The index is valued at 11.8 times estimated earnings, compared with a record low of 10.8 times on Oct 21, according to data compiled by Bloomberg.

Bloomberg News