Most China stocks rise

Most China stocks rose on speculation the nation’s equities are undervalued relative to earnings and U.S. President Barack Obama’s expected jobs proposal may boost the world’s biggest economy.

Yanzhou Coal Mining Co. advanced to one-week high, pacing gains for energy producers. Zijin Mining Group Co., China’s biggest gold producer, lost 1.1 percent before a report tomorrow that will probably show Chinese inflation slowed last month.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, gained 0.1 percent to 2,517.26 at 9:44 a.m., with 472 stocks higher, 366 lower and 116 unchanged. The CSI 300 Index slipped 0.1 percent to 2,775.23. Coal producers advanced, while financial companies declined.

“Obama’s proposed plan may spur a short-term rally,” said Wu Kan, a fund manager at Dazhong Insurance Co., which oversees $285 million. “China’s market will continue to be volatile due to the unclear outlook for inflation control measures.”

The Shanghai gauge has slumped 11 percent this year as the central bank raised interest rates five times and ordered lenders to set aside more cash as deposit reserves 12 times since the start of 2010 to contain inflation. It is valued at 11.6 times estimated earnings, matching a record low set on Sept. 6, according to daily data compiled by Bloomberg.

The central bank may raise interest rates this month or next, the Securities Times reported. Increases would be triggered by quickening inflation, the newspaper said, citing an unidentified economist at China International Capital Corp.

China’s inflation rate jumped to a three-year high of 6.5 percent in July. Consumer-price gains may have slowed to 6.2 percent last month, according to the median estimate of 26 economists surveyed by Bloomberg News. August inflation data are scheduled to be released tomorrow.

Chinese stocks face “challenges” this year because the government is unlikely to ease measures to stem inflation even as global economic growth slows, said Jefferies Group Inc.’s head of Hong Kong and China Research.

Investors should be cautious on the nation’s property developers as sales may worsen in the next two months, while small-company shares are more vulnerable than their larger peers to a global downturn, said Christie Ju, who joined the U.S. investment bank in Hong Kong in January.

The gauge tracking financial companies slipped 0.2 percent, the most among CSI 300’s 10 industry groups. China Vanke Co. lost 0.3 percent to 8.10 yuan. Agricultural Bank of China Ltd. fell 0.4 percent to 2.57 yuan.

Equities are unlikely to decline further this year given the country’s economic growth and corporate profits, according to Fan Gang, a former academic adviser to the nation’s central bank.

‘Hard to Imagine’

“It’s hard to imagine this could be lower,” Fan, a former member of the People’s Bank of China’s monetary policy committee, said in a Bloomberg Television interview in Hong Kong. China’s economy is “still growing 9 percent and the profit of those listed companies really growing as well, so I don’t see the reason why it would continue to fall to even lower levels.”

China won’t raise interest rates or bank reserve requirements in the next two-to-three weeks, said Fan, who is now director of China’s National Economic Research Institute.

Yanzhou Coal added 1.1 percent to 28.64 yuan. The gauge tracking energy producers in the CSI 300 gained 0.3 percent, the most among 10 industry groups.

President Obama prepared to unveil his proposals for promoting job growth in an address to a joint session of Congress today. He plans to propose injecting more than $300 billion into the economy next year, mostly through tax cuts, infrastructure spending and direct aid to state and local governments.

Italian Prime Minister Silvio Berlusconi won a confidence vote on austerity measures and Germany’s top court rejected challenges to the participation of Europe’s largest economy in euro-rescue funds, easing concern about Europe’s debt crisis.

China’s stocks are poised to drop, if history is any guide, with trading activity at “pretty much dead” levels, according to China International Capital Corp.

“Trading has been pretty much dead in the A-shares market amid recent market routs,” Hao Hong, a Beijing-based global strategist at CICC, wrote in a report this week. “Consensus took this as a sign that Shanghai has bottomed. But we are less enthusiastic.”

The average daily turnover for shares on Shanghai Composite plunged to 55.7 billion yuan this month through Sept. 6, a 54 percent drop compared with average trading in the first half of the year, according to data compiled by Bloomberg. Trading on Sept. 6 was a 14-month low of 50 billion yuan ($7.8 billion).