China's stocks rebound from seven-month low

Guangzhou Pharmaceutical Co. advanced 4 percent after China International Capital Corp. recommended investors “stay defensive” by holding health-care and agriculture stocks. Inner Mongolia Yili Industrial Group Co., the biggest dairy producer, climbed 2 percent. Jiangxi Copper Co. and PetroChina Co. led declines among raw-material producers after commodity prices plunged Tuesday.

The Shanghai Composite Index rose 21.88, or 0.8 percent, to close at 2,857.15, reversing a loss of as much as 2.3 percent. The gauge has slumped 13 percent in 2010, Asia's worst performer, as the government unwound monetary stimulus and stepped up measures to prevent a housing bubble inflated by record lending last year.

“The declines have been too much; a rebound is justified,” said Zhao Zifeng, who helps oversee about US$10.2 billion at China International Fund Management Co. in Shanghai.

The CSI 300 Index added 0.6 percent to 3,036.39. Futures on the CSI 300 expiring on May 21, the most active contract, gained 0.3 percent to 3,078.6.

“Stay put, stay defensive,” Hao Hong, Beijing-based global equity strategist at CICC, said in a report. Hao also advised investors to hold utility and telecom companies. The brokerage was the top-ranked for China research in the annual survey by Asiamoney magazine.

Measures tracking consumer staple and health-care stocks climbed 2.7 percent and 2.4 percent, respectively, the most among the CSI 300's 10 industry groups.

The Reuters/Jefferies CRB Index of 19 raw materials Tuesday fell 2.3 percent to 271.6, the biggest slide since Feb. 4, as a 110 billion-euro (US$143 billion) rescue package to help Greece avoid default failed to ease concern that swelling sovereign debt will derail the economic recovery.

Nickel, silver and gasoline led the declines. Crude oil dropped the most in three months, and copper slipped to a nine- week low. Prices also fell after a survey of purchasing executives showed Chinese manufacturing grew at a slower pace in April.

Foreign investors are short selling China's stocks through a yuan-denominated exchange-traded fund at the highest rate in more than two years, underscoring concern that property curbs will slow the economy.

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