February 08, 2012, 10:43 PM EST

By Bloomberg News

Feb. 9 (Bloomberg) — Most Chinese stocks climbed as investors bought shares of companies whose earnings benefit from rising prices and an easing cash crunch spurred gains for small companies.

Liquor maker Kweichow Moutai Co. led an advance for consumer-staples producers after January inflation unexpectedly rebounded to 4.5 percent during the Chinese new year holiday on accelerating food prices. Ledman Optoelectronic Co. paced a rally for smaller companies as benchmark money-market rates fell, signaling improving liquidity in the financial system.

“The Spring Festival effect boosted January inflation and it’s a one-off rebound,” said Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co., referring to the Chinese New Year holiday from Jan. 22 to Jan. 28. “Prices will come down in the following months. But the central bank will be reluctant to relax monetary policies since the inflation rate is still perceived as high.”

The Shanghai Composite Index rose 2.46 points, or 0.1 percent, to 2,349.99 as of 10:59 a.m. local time, with three stocks advancing for every one that declined. The CSI 300 Index added 0.2 percent to 2,533.49. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 1.6 percent yesterday in New York, led by solar companies.

The Shanghai Composite has rebounded 6.8 percent this year, after plunging 33 percent in the previous two years, on speculation the central bank will further cut lenders’ reserve- requirement ratios to spur growth. The central bank announced on Nov. 30 a cut in reserve ratios, the first reduction since 2008. It lifted reserve ratios six times last year to cool inflation that accelerated to its fastest pace in three years in July.

Holiday Distortions

The 4.5 percent of January inflation compared with the median 4 percent estimate in a Bloomberg News survey of 33 economists and 4.1 percent in December. Producer-price inflation eased to 0.7 percent from a year earlier after a 1.7 percent gain in December, the statistics bureau said in a separate report.

A measure of consumer staples stocks in the CSI 300 advanced 0.6 percent, the second-biggest gain among the 10 industry groups. Kweichow Moutai, China’s biggest producer of baijiu liquor by market value, rose 1.1 percent to 190.41 yuan. Zhejiang Beingmate Scientific-Industrial-Trade Share Co., a producer of milk powder for babies, climbed 3.7 percent to 24.40 yuan.

“Most investors and traders know January inflation readings were significantly distorted by the Lunar New Year holiday,” Lu Ting, a Hong Kong-based economist at Bank of America Corp., wrote in a report today. Inflation may slow to below 4 percent this month, Wang Tao, an economist at UBS AG, said in an interview with Bloomberg Television today.

Smallcaps Gain

The ChiNext index of start-up companies advanced 1.2 percent in Shenzhen. Ledman Optoelectronic, a producer of light- emitting diode products, jumped 5.1 percent to 16.63 yuan.

The seven-day repurchase rate, a gauge of funding availability in the financial system, fell 4 basis points to 3.68 percent at 10:55 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. A trader said the central bank will skip bill sales today.

The MSCI Asia Pacific Index fell today after Greek leaders failed to agree on pension cuts, threatening to derail negotiations with creditors to receive a rescue package. Greek political leaders left a pension issue unresolved after a meeting, said Panos Beglitis, spokesman for the socialist Pasok Party.

Prime Minister Lucas Papademos said separately political party leaders agreed on all measures to secure a second financing package except for one and that issue will be dealt with during discussions with the so-called troika, according to an e-mailed statement from the premier’s office. The troika represents the European Commission, the European Central Bank and the International Monetary Fund.

–Zhang Shidong. Editors: Allen Wan, Richard Frost

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net