Bloomberg News

China’s Stocks Advance Most in Two Weeks Amid Policy Speculation

November 29, 2011

Nov. 29 (Bloomberg) -- China stocks rose, driving the benchmark index up the most in two weeks, on speculation the government will take measures to bolster the economy and European leaders will boost efforts to end the debt crisis.

Jiangxi Copper Co. and Anhui Conch Cement Co. gained among companies most tied to economic growth after Citigroup Inc. said the government may shift its attention to stabilizing growth. Citic Securities Co., the nation’s biggest listed brokerage, added 1.2 percent after Xinhua News Agency said the government will accelerate a plan to allow Hong Kong-based yuan funds to invest in mainland securities.

“The government will introduce more pro-growth economic policies as a slowdown becomes obvious next year with the weakness in the property market and exports,” said Wei Wei, an analyst at West China Securities Co. in Shanghai.

The Shanghai Composite Index climbed 29.36 points, or 1.2 percent, to 2,412.39 at the close, its biggest gain since Nov. 14. The CSI 300 Index rose 1.4 percent to 2,608.57. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, rallied 3.3 percent in New York yesterday.

The Shanghai Composite has dropped 2.3 percent in November on concern growth in China, the world’s second-largest economy, is cooling and Europe’s sovereign debt crisis is deteriorating. The gauge is valued at 11.4 times estimated earnings, compared with a four-year average of 17.3 times, according to weekly data compiled by Bloomberg. The measure has fallen 14 percent this year after the central bank raised rates three times and lifted the reserve-requirement ratio to curb inflation.

Europe Debt

Global stocks rallied yesterday after German Finance Minister Wolfgang Schaeuble urged fast-track treaty changes to tighten budget discipline. European finance ministers meet today to thrash out details on how to boost the European Financial Stability Facility.

Europe and the U.S. make up about a total of 35 percent of China’s exports, according to Shenyin & Wanguo Securities Co.

Gauges tracking energy and material stock rose 1.9 percent and 1.7 percent, respectively, the two best performers among the CSI 300’s 10 industry groups.

Jiangxi Copper, China’s biggest producer of the metal, gained 1.9 percent to 25.92 yuan. Anhui Conch, China’s biggest cement maker, climbed 1.8 percent to 17.21 yuan. Zhuzhou Smelter Group Co., China’s biggest producer of refined zinc, advanced 3.2 percent to 11.66 yuan. China Shenhua Energy Co., the nation’s largest coal producer, added 1.3 percent to 26.15 yuan.

Policy Tone

China is expected to shift from fighting inflation to stabilizing economic growth, which could lead to more policy easing, Minggao Shen and Ben Wei, analysts at Citigroup, wrote in report dated yesterday.

Historically, there’s a better chance that equity market will gain in December if the policy tone is changed, and the government may cut the reserve requirement ratio before the Lunar New Year, the report said.

Citic Securities gained 1.2 percent to 11.27 yuan. Haitong Securities Co. advanced 1.4 percent to 8.20 yuan. China Everbright Securities Co., a unit of the nation’s largest state- owned investment group, climbed 1.3 percent to 11.73 yuan.

Preparations for allowing investment in the nation’s securities markets by Hong Kong-based yuan funds picked up as the flow of overseas capital into China slowed, Xinhua reported yesterday, citing people it didn’t identify.

Yuan Funds

The China Securities Regulatory Commission, the central bank and the State Administration of Foreign Exchange have agreed on the plan, which allows qualified investors to raise money in yuan from Hong Kong and invest in bonds and A shares, Xinhua reported yesterday, citing people it didn’t identify.

Officials from the People’s Bank of China, CSRC and SAFE didn’t immediate reply to queries by Bloomberg News about the Xinhua report.

Goldman Sachs Group Inc. said clients should exit a bet that Hong Kong-listed companies in China will gain as UBS AG and Citigroup Inc. cut growth forecasts for the world’s second- biggest economy.

“We are closing our recommended long position in Chinese equities” after the trade lost 5 percent, Goldman analysts including Noah Weisberger wrote in an e-mailed report dated yesterday. In a Nov. 6 report, the analysts favored shares in the Hang Seng China Enterprises Index.

Estimates Slashed

Gross domestic product will increase 8 percent in 2012, less than a previous call of 8.3 percent, Hong Kong-based economist Wang Tao, of UBS, said in a note today. Citigroup cut its forecast to 8.4 percent from 8.7 percent. The banks have also reduced global growth estimates.

The Organization for Economic Cooperation and Development says that growing doubts about the survival of Europe’s monetary union has caused global growth to stall and represents the main risk to the world economy.

The Paris-based organization has lowered its estimate for China’s 2012 expansion to 8.5 percent from a 9.2 percent forecast in May. A slowdown in property sales could trigger developer collapses and lead to bad loans, it said.

A Chinese government report due on Dec. 1 may show manufacturing is likely to contract for the first time since February 2009 this month. The Purchasing Managers’ Index may fall to 49.8 from 50.4 in October, according to the median forecast of 16 economists surveyed by Bloomberg. A reading below 50 indicates contraction.

Cnooc Ltd. advanced in U.S. trading yesterday after completing a $2.1 billion purchase of OPTI Canada Inc. Solar stocks also climbed after an industry group said it expects sales in the industry to grow 28 percent this year in China.

--Zhang Shidong. Editors: Richard Frost, 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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