Bloomberg News

China Stocks Rise to 2-Month High on Property Easing Speculation

February 12, 2012

Feb. 10 (Bloomberg) -- China’s stocks rose, capping a fourth week of gains for the benchmark index, after an eastern Chinese city said it would subsidize home purchases, signaling some policy easing of property restrictions.

Developers China Vanke Co. and Poly Real Estate Group Co. surged at least 2 percent after Wuhu city said it will waive a deed tax. Anhui Conch Cement Co. led gains for construction material makers after the 21st Century Business Herald reported government investment in low-income housing will increase. EGing Photovoltaic Technology Co. jumped 4.7 percent after Deutsche Bank AG said major Asian solar manufacturers are running at full capacity. China’s exports fell 0.5 percent from a year ago in January while imports declined 15.3 percent, a report showed.

“Some easing of curbs may follow in smaller cities as local governments wrestle with the central bank to protect local interests,” said Luo Bin, who manages about $60 million as general manager at Shanghai Mingyu Xiaoyang Investment Management Co. “It’s a positive sign for the property market.”

The Shanghai Composite Index climbed 2.4 points, or 0.1 percent, to 2,351.98 as the close, its highest close since Dec. 2. The CSI 300 Index rose 0.2 percent to 2,533.62. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 0.2 percent in New York.

The Shanghai index advanced 0.9 percent this week for a fourth weekly gain, its longest winning streak since July 15. The measure has rebounded 6.9 percent this year on speculation the central bank will further cut lenders’ reserve-requirement ratios to spur growth. It announced a cut in reserve ratios on Nov. 30, the first reduction since 2008, after boosting them and interest rates last year to cool inflation that accelerated to its fastest pace in three years in July.

Property Stocks Rally

A gauge of property stocks jumped 3 percent in the Shanghai Composite today, the most among the five industry groups. Vanke, the nation’s biggest listed property developer, climbed 2 percent to 7.85 yuan. Poly Real Estate, the second largest, jumped 3.3 percent 10.91 yuan. Gemdale Corp. advanced 2.8 percent to 5.56 yuan.

The property gauge rose this week after the central bank pledged to support first-time homebuyers and said it will increase support for building of affordable housing.

Wuhu, a mid-sized city in Anhui province, will give subsidies of 50 yuan ($7.90) a square meter (10.76 square feet) for the purchase of homes between 70 square meters and 90 square meters, and 150 yuan a square meter for new homes smaller than 70 square meters, the local government said in a statement on its website yesterday.

Easing Signal

Wuhu’s announcement may signal more easing of property measures by local governments as prices fall, said Bai Hongwei, a property analyst at China International Capital Corp. in Beijing. Premier Wen Jiabao reiterated on Jan. 31 that China will maintain real-estate market curbs to bring prices down to a reasonable level. Beijing and Shanghai are among cities that said they will continue to impose restrictions this year.

Anhui Conch, the biggest cement maker, gained 0.6 percent to 17.51 yuan. BBMG Corp. added 2.9 percent to 8.90 yuan.

Government investment in low-income housing will rise by 20 billion yuan this year, the 21st Century Business Herald reported yesterday, citing unidentified local officials.

China’s trade surplus was $27.28 billion in January, the customs bureau said on today. Analysts forecast a 1.4 percent drop in exports and a 3.6 percent decline in imports.

“It is worth noting that the trade data at this time of the year is heavily distorted by the Lunar New Year holidays, which fell in January this year and February last year,” Haibin Zhu and Grace Ng, economists at JPMorgan Chase & Co., said in a a report. “The fact that exports managed to show a month-on- month gain in seasonally-adjusted terms in January suggests that the underlying growth pace in exports was indeed quite solid. Meanwhile, imports came in weaker than expected.”

Solar Stocks

The data may add to concerns that the world’s economy faces a deeper slowdown in the first quarter as the government curbs property prices and weaker global growth limits overseas demand. Commerce Minister Chen Deming said yesterday overseas shipments “cannot make us optimistic” and the International Monetary Fund cautioned this week Europe’s debt crisis may cut China’s growth rate almost in half this year.

EGing Photovoltaic led gains for solar stocks, jumping 4.6 percent to 21.71 yuan.

“Demand pick-up in multiple markets appears to be the primary driver of recent strength in fundamentals,” Vishal Shah, an analyst at Deutsche Bank, wrote in a report yesterday. “Tier-one companies in China, Taiwan and Korea have rising orders and are running at 100 percent of utilization.”

China plans to develop three gigawatts of solar capacity this year, double its existing capacity, the National Energy Administration said on its website on Jan. 11.

Reserve Ratios

Chinese lenders’ reserve-ratio cuts may be postponed after a jump in inflation last month, Market News International reported yesterday, citing unidentified government officials and economists. Inflation pressure remains strong because Middle East tensions may boost oil prices, said a source familiar with discussions within the People’s Bank of China.

Consumer prices rose 4.5 percent in January, the statistics bureau said yesterday. That compared with the median 4 percent estimate in a Bloomberg News survey and 4.1 percent in December.

--Zhang Shidong, with assistance from Kana Nishizawa in Hong Kong. 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


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