China Cosco Holdings Co. gained 1.9 percent after marine freight rates increased the most in two months. Aluminum maker Shanxi Guanlu Co. added 0.4 percent after Rio Tinto Group said it expects China’s commodity demand to expand. PetroChina Co. and China Shenhua Energy Co. paced the decline among energy producers after Caijing magazine reported the government will impose a tax on oil and gas in the Xinjiang region.

“Commodity producers and shipping lines are relatively cheap after this year’s decline,” said Wang Zheng, a fund manager at Jingxi Investment Management Co. “It looks like we haven’t reached the bottom yet as there isn’t any official sign that the government will ease its stance on the property market.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, gained 3.16, or 0.1 percent, to close at 2,625.79 after changing direction more than 10 times. The CSI 300 Index was unchanged at 2,813.94.

Concern that the government will step up measures to curb property speculation and government debt in Europe will prevent nations from bolstering their economies has dragged the Shanghai Composite down 20 percent this year. The slump decreased the average price of the stocks on the gauge to 19.6 times earnings, near the lowest level since February 2009.

Rio Tinto Group, the world’s third-biggest mining company, expects China’s commodity demand to expand, according to Chairman Jan du Plessis.

China Demand

“China’s demand for iron ore, copper, coal and aluminum is expected to grow over the next 15 years, after which time we expect to see increasing demand from India,” du Plessis said today at Rio’s annual meeting in Melbourne.

Shanxi Guanlu, a Chinese aluminum smelter, rose 0.4 percent to 5.07 yuan. Tongling Nonferrous Metals Group Co., China’s second-biggest copper producer, advanced 0.2 percent to 16 yuan.

Three-month copper on the London Metal Exchange gained as much as 1.8 percent to $6,848 a metric ton. Aluminum rose 1.1 percent and zinc added 3.5 percent.

China Cosco, the world’s largest operator of dry-bulk ships, gained 1.9 percent to 10.21 yuan. China Shipping Development Co., a unit of China’s second-biggest sea-cargo group, advanced 1.1 percent to 9.51 yuan.

The Baltic Dry Index jumped 6.2 percent, to 4,187 points yesterday, according to the Baltic Exchange. That’s the highest level since Nov. 25 and the biggest increase since March 4.

Fund Buying

Martin Currie Ltd. is increasing its allocations for China’s yuan-denominated stocks after a recent slump and plans to take advantage of the opening of stock-index futures to foreign investors.

China’s A-share market “looks more interesting,” Chris Ruffle, who helps manage $19 billion as China co-chairman of Martin Currie in Shanghai. “I say it’s extremely likely we will make use of index futures over time.”

China will allow qualified foreign institutional investors, or QFIIs, to invest in the country’s stock-index futures, the U.S. Treasury Department said yesterday at the end of the U.S.- China Strategic & Economic Dialogue in Beijing.

Index futures began trading on the China Financial Futures Exchange in Shanghai on April 16, while margin trading and short selling was introduced March 31.

Henderson Global Investors has been buying Chinese equities on expectation Europe’s debt crisis will prompt China’s government to delay further curbs on the property industry.

Insurers Gain

“We see better visibility and growth prospects outside of Europe, particularly in China,” said Manraj Sekhon, London- based head of international equities, whose firm oversees $94 billion in assets, in an interview yesterday.

China Life Insurance Co., the nation’s biggest insurer, climbed 0.6 percent to 24.14 yuan. China will allow domestic insurers to invest in shares listed on the Hong Kong exchange’s main board, the Shanghai Securities News reported today, without saying where it obtained the information. Insurers are currently only allowed to invest in Hong Kong H-shares and red chips, the report said.

The cap on holdings of yuan-denominated A-shares and A- share equity funds will be raised to 20 percent of total assets, the report said. Currently insurers can hold as much as 20 percent of assets in A-shares, A-share funds, bond funds and money market funds, according to the report.

Resource Tax

PetroChina, the nation’s biggest oil company, lost 0.4 percent to 10.81 yuan. Shenhua, the country’s largest coal producer, fell 0.3 percent to 24.01 yuan. China Coal Energy Co., the nation’s second-largest coal producer, slid 0.5 percent to 9.76 yuan.

China will impose a price-based resource tax on oil, gas and coal production in the western Xinjiang region to take effect on June 1, Caijing magazine reported today on its website, citing unidentified officials from the finance ministry and tax bureau. The tax on coal will be between 2 and 5 percent, while the tax on oil and gas will be 5 percent, the report said.

The Shanghai Composite entered a bear market on May 11 after falling 20 percent from its Nov. 23 high. The government has ordered banks to sets aside more reserves three times this year, reined in loans for purchases of multiple homes, increased mortgage rates, and raised down payment requirements as it sought to damp house price gains.

Martin Currie’s Ruffle said it was “too early” to buy developers, while insurers and brokerages had become “interesting” after recent declines.

Chinese investors opened 1.7 percent fewer domestic accounts to trade stocks during the week ended May 21 than a week earlier, according to the China Securities Depository and Clearing Corp. Investors opened 284,258 accounts during the week, according to the clearing house.

The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.

China Railway Erju Co. (600528 CH) climbed 2.8 percent to 9.13 yuan, a two-week high, after saying it plans to raise as much as 1.2 billion yuan ($176 million) from a rights offer. The company will offer two shares for every 10 held by shareholders, the statement said.

Datang International Power Generation Co. (601991 CH), China’s biggest-publicly traded electricity producer by market value, jumped 7.5 percent to 7.58 yuan, the biggest gain since April 21, after announcing plans to fund energy projects by selling as much as 8 billion yuan in shares.

--Zhang Shidong. Editors: Richard Frost, Allen Wan

To contact the editor responsible for this story: Linus Chua at lchua@bloomberg.net

Sourced from www.businessweek.com