Bloomberg News

China’s Stock Futures Rise on Easing Policy Signals, Earnings

October 27, 2011

Oct. 27 (Bloomberg) -- China’s stock-index futures, signaling a fourth day of gains for the benchmark index, on speculation the government will ease monetary policies to boost the world’s second-biggest economy.

Futures on the CSI 300 Index expiring in November, the most active contract, gained 0.1 percent to 2,665.80 as of 9:16 a.m. local time. China Citic Bank Corp. and Agricultural Bank of China Ltd. may advance after reporting profit increases of at least 40 percent. Ping An, China’s second-biggest insurer, may retreat after third-quarter earnings slid 44 percent on declining investment income from stocks.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, climbed 17.81 points, or 0.7 percent, to 2,427.48 yesterday, capping a three-day, 4.8 percent gain. The CSI 300 Index rose 1 percent to 2,651.65.

The Shanghai Composite has slumped 14 percent this year after the central bank raised interest rates three times in 2011 and ordered lenders to set aside a bigger portion of their deposits to curb inflation that’s near a three-year high. It’s valued at 11.3 times estimated earnings, compared with a record low of 10.8 times on Oct. 21, according to weekly data compiled by Bloomberg.

China may cut banks’ reserve requirements before the end of this year to stoke lending to small companies and boost the economy, according to Guotai Junan Securities Co., Mizuho Securities Asia Ltd. and Barclays Plc. The comments came after Premier Wen Jiabao said the government may fine-tune economic policies as needed.

“Our view has been that we would not rule out an RRR cut towards year-end and think an RRR cut for smaller banks, which have more exposure to SMEs, could happen first as was the case in late 2008,” Yiping Huang, Jian Chang and Lingxiu Yang, Hong Kong-based economists at Barclays, wrote in a report yesterday.

‘Fine Tune’

China may “fine-tune” open market operations and relax credit instead of cutting interest rates or reserve ratios, China Securities Journal said in an editorial today.

The government may expand fiscal spending for infrastructure construction and exclude the property market from “fine-tuning” because the price gain trend in smaller cities hasn’t changed, it said.

Citic Bank, the banking unit of the nation’s largest investment company, said third-quarter profit increased 41 percent on higher lending and fee income. AgriBank, the fourth largest by assets, said profit grew 40 percent. Industrial & Commercial Bank of China Ltd., the biggest lender, may say later today net income rose 26 percent to 53.7 billion yuan, according to analysts’ median estimate.

The 507 companies that have already reported third-quarter profits out of the 917 in the Shanghai Composite posted a 23 percent earnings increase in the period on average, trailing analysts’ estimates by 9.6 percent, according to data compiled by Bloomberg. That compared with a 26 percent average gain in second-quarter earnings, the data showed.

--Zhang Shidong. Editors: Allen Wan, Darren Boey

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


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