China Stocks Jump Most in 3 Weeks on Inflation, Property Outlook
February 08, 2012, 7:26 PM ESTBy Bloomberg News
Feb. 8 (Bloomberg) -- China’s stocks rallied the most in three weeks on speculation slowing inflation will provide more leeway for the central bank to ease monetary policy and after the government pledged to support first-time homebuyers.
Jiangxi Copper Co., the largest producer of the metal, soared 10 percent after an economist said China may “move shortly” to help Europe resolve its debt crisis. China Vanke Co., the biggest developer, rose 2.9 percent after the central bank said officials will increase support for building of affordable housing. China Petroleum & Chemical Corp. and PetroChina Co. led a climb for refiners after the government raised domestic fuel tariffs for the first time in 10 months. Inflation data for January is scheduled to be released tomorrow.
“It looks like the market is pricing in expectations about pretty low inflation, which will allow the government to relax its tight monetary policies such as a cut in the reserve- requirement ratio,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “It’s still possible the government will relax its curbs on the property market to avoid a hard landing for the economy.”
The Shanghai Composite Index rose 55.63 points, or 2.4 percent, to 2,347.53 at the close, the most since Jan. 17. The CSI 300 Index gained 2.9 percent to 2,528.24. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 0.2 percent yesterday.
Inflation Outlook
The Shanghai Composite has rebounded 6.7 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 lending to small companies. 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 and raised interest rates to cool inflation that accelerated to its fastest pace in three years in July.
Chinese consumer prices probably rose 4 percent in January, compared with a 4.1 percent gain in December, according to 33 economists’ estimates compiled by Bloomberg. The inflation data is due to be released tomorrow. Inflation may drop to as low as 3.2 percent in February from a three-year high of 6.5 percent in July, Bank of America Corp. said.
China’s efforts to curb inflation are starting to pay off in the bond market, where yields are poised to exceed consumer- price increases for the first time in 16 months.
The yield on 10-year government bonds has gained seven basis points this month to 3.48 percent and trailed inflation since October 2010, resulting in a so-called negative real yield.
Financial Stocks Rally
A gauge of financial companies in the CSI 300 jumped 2.6 percent. Industrial & Commercial Bank of China Ltd., the nation’s biggest listed lender, rose 1.9 percent to 4.41 yuan. Citic Securities Co., China’s biggest listed brokerage, jumped 4.1 percent to 10.95 yuan.
Vanke led gains for property stocks, rising 2.9 percent to 7.59 yuan. Poly Real Estate Group Co., China’s second-largest developer by market value, added 2.9 percent to 10.42 yuan, even after the second-biggest developer said yesterday contracted sales dropped 69 percent in January.
Chinese officials will ensure that “loan demand from first-home families” is met, the People’s Bank of China said on its website yesterday. A crackdown on real-estate speculation threatens to trigger a property slump in the world’s second- biggest economy. Concerns about the outlook for China’s economy have increased after the International Monetary Fund warned this week the expansion would be cut almost in half should Europe’s debt crisis worsen.
‘Two Birds’
China may “move shortly” to help Europe resolve its debt crisis by providing an investment of as much as 100 billion euros ($132 billion), said Yuan Gangming, an economist at the Chinese Academy of Social Sciences.
The money would probably go to the European Financial Stability Facility, the euro bailout fund, said Yuan, adding that the forecasts are his own and don’t necessarily represent government plans. Economists from the academy provide policy advice without direct involvement in decisions.
Helping Europe is like “hitting two birds with one stone,” Yuan said in an interview in Beijing Feb. 6. The action would have many benefits and few drawbacks, Yuan said.
A measure of material stocks in the CSI 300 climbed 5 percent, the biggest gainer among the 10 industry groups. Jiangxi Copper surged the 10 percent daily limit to 27.28 yuan. Tongling Nonferrous Metals Group Co., China’s second-biggest copper producer, also advanced by 10 percent to 21.73 yuan.
Gasoline Price Increases
Greek Prime Minister Lucas Papademos will meet with the leaders of the three parties supporting his government on austerity measures needed to secure a second European Union aid package, said a spokeswoman at the premier’s office who declined to be named. Europe is China’s biggest export market, making up about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.
Sinopec, China’s biggest refiner, advanced 1.7 percent to 7.78 yuan. PetroChina, the second largest, climbed 1.7 percent to 10.26 yuan.
Retail gasoline and diesel prices will rise 300 yuan ($47.7) a metric ton from today, the National Development and Reform Commission, the nation’s top planning agency, said on its website yesterday.
--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
