Bloomberg News

China’s Stocks Rise, Capping Third Week of Gains; Banks Advance

February 03, 2012

Feb. 3 (Bloomberg) -- China’s stocks rose, driving the benchmark index to its longest stretch of weekly gains in seven months, on speculation the central bank may take more measures to boost economic growth and signs that a cash crunch is easing.

China Construction Bank Corp. and China Merchants Bank Co. led an advance for lenders on prospects the central bank may lower reserve-ratio requirements. Xinjiang Dushanzi Tianli High & New Tech Co. jumped 10 percent, pacing gains for a gauge of small companies, after the government said it will promote the role of technology in agriculture.

“Though China’s growth is slowing, it won’t be a hard landing,” said Zhang Ling, general manager at Shanghai River Fund Management Co. “Monetary policy is starting to ease and the market’s expectations of a reserve-requirement cut are rising. Stocks are also really cheap now.”

The Shanghai Composite Index rose 17.85 points, or 0.8 percent, to 2,330.41, the highest level since Dec. 7. It climbed 0.5 percent for a third weekly gain, the longest since the period ended July 15. The CSI 300 Index advanced 0.8 percent to 2,506.09. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 0.6 percent yesterday in New York.

The Shanghai Composite has climbed 6 percent this year, after plunging 33 percent in the previous two years, on speculation slowing economic growth will push the central bank to relax monetary policies and the government will take measures to support stocks. The measure trades at 9.6 times estimated earnings, near the record low of 8.9 times reached on Jan. 6, according to weekly data compiled by Bloomberg.

Cash Crunch Eases

Stocks advanced this week after a report on manufacturing expanded more than economists’ forecasts and Premier Wen Jiabao said the government will support small companies with a 15 billion-yuan ($2.4 billion) fund amid a cash crunch.

The seven-day repurchase rate, which measures interbank funding availability, dropped 98.1 basis points, or 0.981 percentage point, to 3.35 percent as of 3:35 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It’s the biggest drop since Jan. 19.

Construction Bank, the nation’s second-biggest lender, added 0.8 percent to 4.89 yuan. China Merchants rose 0.9 percent to 12.98 yuan. China Minsheng Banking Corp., the nation’s first privately owned bank, advanced 0.9 percent to 6.55 yuan.

“I still expect China to do something and cut reserve ratios this month,” Frances Cheung, a Hong Kong-based strategist at Credit Agricole CIB, said yesterday. “I think liquidity is still going to be tight, if there is no liquidity injection.”

Smallcaps Rise

Xinjiang Dushanzi Tianli jumped 10 percent to 6.90 yuan, leading gains in the CSI Smallcap 500 Index, which rose 1.7 percent. The ChiNext index of start-ups advanced 2.2 percent.

China will promote the role of innovation and technology in agriculture for better harvests and to guarantee the supply of agricultural products, Vice Premier Hui Liangyu said in a statement posted on the central government’s website.

Equities fell earlier today after industrial companies’ profits and a gauge of service industries expanded at a slower pace.

The non-manufacturing purchasing managers’ index fell to 52.9 from 56 in December, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement today in Beijing. A reading above 50 indicates an expansion.

The January non-PMI reading was “not that bad” given the timing of the Chinese holiday this year, Bank of America Corp. China economist Ting Lu said in a report. The Lunar New Year holiday ran from Jan. 22 through Jan. 28.

Chinese industrial companies’ profits climbed 25.4 percent from 2010 to 5.45 trillion yuan last year, the National Bureau of Statistics said. That compared with a 49.4 percent gain in the first 11 months of 2010.

--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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