China’s Stocks Rise Most in 3 Weeks on Bank Loans, CPI Outlook
November 14, 2011, 6:32 PM ESTBy Weiyi Lim
Nov. 14 (Bloomberg) -- China’s stocks rose the most in three weeks, as investors speculated the government is relaxing lending curbs to stem an economic slowdown and lower food prices gave policymakers leeway to ease monetary policy.
China Construction Bank Corp. and Poly Real Estate Group Co. led gains for financial companies after Chinese banks’ October new loans jumped by the most since June and prices for marbled pork meat fell 2.5 percent this month. China Shenhua Energy Co. and Jiangxi Copper Co. surged more than 2 percent as the appointment of new leaders in Greece and Italy eased concern Europe’s debt crisis will worsen. BYD Co. jumped 10 percent as Xinhua News Agency reported China will remove restrictions on new license plates for buyers of new-energy vehicles.
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, rose 1.9 percent to 2,528.71 at the close, the most since Oct. 24. The CSI 300 added 2.1 percent.
“There’s a lot of good news for stocks today; bank loans exceeding expectations is a positive sign as it shows the government may be relaxing curbs and November loans should see a similar trend,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “The new development in Europe is definitely positive. A lot of attention is placed on its problems so any relief will mean upside for stocks in the near- term.”
The Shanghai Composite has rebounded 9.1 percent from this year’s low on Oct. 21, after the government announced measures to help small businesses through easier access to bank loans and inflation eased. Consumer price gains slowed to 5.5 percent in October from a three-year high of 6.5 percent in July, giving the government greater scope to unwind monetary tightening as Europe’s debt crisis and a U.S. slowdown hurt exports.
Food Prices Drop
Prices in China for marbled pork meat fell 2.5 percent to 29.03 yuan a kilogram between Nov. 1 to 10 as compared with the previous ten days, the National Bureau of Statistics said in a statement on its website.
A gauge of financial companies in the CSI 300 including banks, insurers and developers jumped 1.8 percent. China Construction, the second-largest lender, gained 1.7 percent to 4.86 yuan. Industrial Bank Co. added 1.9 percent to 13.18 yuan. Poly Real Estate, the second-largest developer, gained 3.1 percent to 9.95 yuan. Ping An Insurance (Group) Co., the second- biggest insurer, jumped 2.9 percent to 39.95 yuan after the company posted gross premium income of 101.7 billion yuan for the 10 months ended October.
Bank Loans
China’s banks made 586.8 billion yuan ($92.5 billion) in new loans last month, exceeding September’s 470 billion yuan and all 18 estimates in a Bloomberg survey, signaling China may be loosening credit limits to sustain growth amid Europe’s debt crisis. The report was released by the central bank on Nov. 11 after the market close.
“The readings are overall positive to market sentiment as the data confirmed market expectations for a looser liquidity condition since October,” Ting Lu, a Hong Kong-based economist at Bank of America Corp. wrote in a Nov. 11 note. “As inflation worries ease and global macro uncertainties rise, the room for fine-tuning of monetary tightening is getting bigger.”
International Monetary Fund Deputy Managing Director Zhu Min and National Economic Research Institute Director Fan Gang, said over the weekend China’s economy was heading for a “soft landing” as growth slows. They cited lower inflation and bad debts at banks, and what Fan said were timely measures to avoid a bubble in the property market.
BYD, the carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc., rose by the maximum limit of 10 percent to 25.63 yuan. New-energy cars will be exempt from the current license plate and traffic restrictions in some major cities, a Xinhua report said, citing a government statement.
Commodity Stocks
China Shenhua, the biggest coal producer, gained 4.1 percent to 28.16 yuan and Jiangxi Copper, the largest producer of the metal, increased 2.8 percent to 28.26 yuan. Copper rose as much as 3.9 percent and crude oil reached $99.69 a barrel, the highest level since July 26.
President Hu Jintao told business executives at the Asia- Pacific Economic Cooperation forum in Honolulu that China will seek to boost imports in part to help stimulate economies around the world.
Mario Monti, former European Union competition commissioner, will lead a new government in Italy after the region’s debt crisis led to the unraveling of a coalition led by Prime Minister Silvio Berlusconi. Greek Prime Minister Lucas Papademos said the country’s new government must implement decisions from an Oct. 26 European summit to receive more loans and avoid default.
‘Stuck in a Range’
Chinese stock markets are “stuck in a range,” with direction driven by the European debt crisis, according to China International Capital Corp. Monetary “fine-tuning” is likely to continue and there is a possibility of a cut in banks’ reserve-ratio requirements on a “differentiated basis,” it said.
The Shanghai Composite has fallen 9.9 percent this year after the central bank raised interest rates three times and lifted the reserve-requirement ratio to curb inflation. The index is valued at 11.9 times estimated earnings, compared with a record low of 10.8 times on Oct. 21, according to weekly data compiled by Bloomberg.
China is “basically ready” to allow foreign companies to sell equity in the world’s second-biggest stock market, according to the Shanghai Stock Exchange official in charge of the so-called international stocks board.
The exchange has finished working on listing and trading rules, while the technological, regulatory, and system requirements are “basically ready,” Xu Ming, executive vice president of the Shanghai Stock Exchange, said in a Nov. 11 interview at the bourse. While there is no timetable for introducing the board, it should start “as soon as possible when the time is ripe,” he said.
Power Stocks
Huaneng Power International Inc., the nation’s biggest power producer, climbed 1.8 percent to 5.08 yuan. Shanghai Electric Power Co. rose 1.7 percent to 5.33 yuan. The China Securities Journal said the goverment may allow power companies to increase prices as inflation eases.
Power companies are facing the worst operating pressure since 2008, with some of their debt-to-asset ratios at almost 150 percent, the journal said in a commentary today. The government may raise on-grid power prices before increasing rates for industrial and agricultural users, it said.
-- Editor: Allen Wan
To contact Bloomberg News staff for this story: Weiyi Lim in Singapore at wlim26@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
