SHANGHAI, Sept 11 ― China’s stocks rose, sending the benchmark index to an 18-month high, amid speculation easing inflation will allow room for government stimulus to bolster the world’s second-biggest economy.

Citic Securities Co and Haitong Securities Co, the nation’s biggest-listed brokerages, climbed at least 1.8 per cent. Camel Group Computer Ltd jumped 5.2 per cent after the battery maker was awarded a certificate to make products for the army. Software maker Neusoft Corp surged 10 per cent to lead gains for technology companies. The consumer price index rose 2 per cent last month, compared with the 2.2 per cent median analyst estimate and 2.3 per cent in July. The producer-price index fell 1.2 per cent, compared with projections for a 1.1 per cent drop.

The Shanghai Composite Index climbed 0.5 per cent to 2,329.07 as of the 11.30am break, poised for the highest close since March 2013. Today’s data add to signs of weakness in domestic demand after figures this week showed declining imports and a slowdown in money-supply expansion.

“The inflation data were pretty low and it makes sense now for the government to continue its targeted easing policies,” said Wei Wei, an analyst at West China Securities Co in Shanghai. “We’ll see more policies going forward and that will be a catalyst for stocks.”

The CSI 300 Index added 0.5 per cent to 2,444.26. The Hang Seng China Enterprises Index was little changed after plunging 2.6 per cent yesterday. Trading volumes in the Shanghai index were 41 per cent above the 30-day average for this time of day.

The Shanghai Composite has rebounded 17 per cent since mid-March, spurred by speculation the Chinese government will reduce ownership of state-owned enterprises and a planned link between exchanges in Hong Kong and Shanghai will fuel inflows.

Exchange link

Shanghai’s shares are poised to outperform their Hong Kong counterparts, according to Aviate Global LLP, an institutional equity brokerage. About 77 per cent of mainland investors surveyed by CLSA Ltd last month said they won’t participate in the exchange link between Shanghai and Hong Kong. Their lack of interest contrasts with Hong Kong traders’ growing appetite for mainland stocks, which are luring record inflows through exchange-traded funds.

The Shanghai index is valued at 8.4 times 12-month projected earnings, the highest level since December, compared with a multiple of 7.1 for the H-shares gauge, according to data compiled by Bloomberg.

A measure tracking financial stocks in the CSI 300 gained 0.8 per cent, the second most among 10 industry groups. Citic Securities gained 2 per cent while Haitong Securities added 1.8 per cent.

Weak economy

Inflation eased to a four-month low in August while factory-gate prices extended their decline to 30 months, according to data from the National Bureau of Statistics. Premier Li Keqiang reiterated yesterday that China won’t have a hard landing and has confidence in achieving key development goals for 2014, with a growth target of about 7.5 per cent.

“Today’s data prove a fact we all know: The economy is still weak,” said Wang Tao, head of China economic research at UBS AG in Hong Kong. “The government has been rolling out measures to stabilize growth. This situation will definitely continue.”

Camel headed for its highest close since August 2011. The certificate from the Chinese People’s Liberation Army is valid through April 2018, the company said in an exchange statement.

Chinese stocks slumped yesterday after Premier Li indicated money-supply growth slowed. Concerns over slower August M2 growth are overdone, Bank of America Corp economists Ting Lu and Sylvia Sheng wrote in note yesterday. Investors have been closely watching money and credit data after getting “shockingly low” July readings and therefore see 12.8 per cent August M2 expansion as a big disappointment, they wrote.

The Bloomberg China-US Equity Index retreated 1.6 per cent yesterday in New York. 21Vianet Group Inc., a Chinese Internet data-center operator, whipsawed investors amid the heaviest volume on record after a short seller said the company is worthless. American depositary receipts of Beijing-based 21Vianet swung between gains of as much as 18 per cent and losses of up to 35 per cent before closing the day down 8 per cent. ― Bloomberg