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By Bloomberg

China’s stocks rose the most in a week, led by banks, amid speculation the government is taking measures to avert a cash crunch amid concern new share offerings will divert funds from existing equities.

Industrial & Commercial Bank of China Ltd. and China Construction Bank Co., the largest lenders, gained at least 1.8 percent, after a person familiar with the matter said the central bank rolled over a lending facility. Power Construction Corporation of China Ltd. surged 5.3 percent on a restructuring plan. Jiangxi Copper Co. slid 2.9 percent to lead declines for metal producers after copper prices plunged.

The Shanghai Composite Index climbed 0.4 percent to 3,248.28 at 1:02 p.m. The People’s Bank of China plans to roll over at least part of a three-month lending facility extended October, the people familiar with the matter said. The 269.5 billion yuan ($43.5 billion) medium-term lending facility was set to expire later this month.

“The news that the central bank is releasing liquidity into the market is boosting bank stocks,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “From a valuation perspective, banking stocks are very cheap and they have room for further upside.”

The CSI 300 Index added 0.4 percent. Hong Kong’s Hang Seng China Enterprises Index advanced 0.4 percent, while the Hang Seng Index gained 0.2 percent. The Bloomberg China-US Equity Index added 1.4 percent yesterday.

The Shanghai Composite has surged 61 percent over the past year, the best performer among 93 global indexes tracked by Bloomberg, amid speculation the government will loosen monetary policy to support economic growth. The index traded at 12.3 times 12-month projected earnings last week, the highest level since May 2011, according to data compiled by Bloomberg. Trading volumes were 53 percent lower than the 30-day average today.

Lending Rollover

ICBC, the nation’s biggest listed lender, gained 1.9 percent while Construction Bank added 2.1 percent. Bank of China Ltd. rose 2.9 percent. China’s listed banks trade at an average 6.4 times earnings, half the multiple of the benchmark index, according to data compiled by Bloomberg.

Twenty-two companies including Spring Airlines Co. and Wanda Cinema Line Co. started to market IPO shares this week, which BOC International said will freeze about 1.4 trillion yuan. Haitong Securities Co. estimated last week the new shares would lock up more than 2 trillion yuan.

Shrinking Bulls

“Although the amount of funds that are estimated to be tied up exceeds any of the previous seven rounds of IPOs, the impact on liquidity, especially on the interbank market, seems to be quite limited so far,” said Frank Sun, an analyst at Shanghai CFETS-ICAP International Money Broking Co. in the city. “Ample liquidity at the beginning of the month helped.”

Power Construction, China’s biggest builder of hydroelectric dams, climbed the most since Dec. 25 after the regulator of state-owned assets approved its plan to raise as much as 2 billion yuan via preferred share sales.

The number of equity bulls in China is shrinking after a rally to four-year highs left shares trading at the world’s biggest premium over analysts’ price targets.

Citigroup Inc. became the latest to cut its outlook on Jan. 12, lowering its rating to neutral from overweight amid concern valuations are turning unattractive. The downgrade follows predictions in the last two weeks from HSBC Holdings Plc, Bocom International Holdings Co. and UBS AG that gains in mainland shares will falter. The Shanghai Composite’s closing level yesterday was 7 percent higher than where analysts tracked by Bloomberg predict the gauge will be in 12 months.

Growth Concerns

“In the short term, the upside will be limited because the rallies have been too fast and too much,” Chen Li, the chief China equity strategist at UBS, said in a Bloomberg Television interview from Shanghai on Jan. 12.

Overseas investors have become net sellers of mainland shares through the Shanghai-Hong Kong exchange link, while new stock account openings dropped 38 percent from their December high and turnover on the Shanghai exchange declined to a seven- week low yesterday.

Jiangxi Copper, China’s biggest producer of the metal, retreated 3.8 percent in Hong Kong. Tongling Nonferrous Metals Group Co., the second biggest, lost 3.3 percent in Shenzhen, while Yunnan Copper Industry Co. dropped 3.1 percent.

Copper plunged to a 5 1/2-year low, leading declines in industrial metals, as slowing global growth dims the outlook for commodities. The World Bank cut its forecast for global growth this year, as an