Bloomberg News

Most Chinese Stocks Climb After Premier Wen’s Policy Comments

February 13, 2012

Feb. 13 (Bloomberg) -- Most Chinese stocks rose after Premier Wen Jiabao said the nation needs to start “fine- tuning” economic policies this quarter, boosting speculation the government will ease monetary policy further.

Shuangliang Eco-Energy Systems Co., a maker of sea water desalination equipment, advanced 4 percent after China said it will increase support for the industry. Western Mining Co. led gains for metals producers as the Greek parliament approved austerity measures to secure a second bailout package. China Vanke Co. and Poly Real Estate Group Co. led a gauge of property companies to its biggest drop in a week after Wuhu city said it will shelve a plan to provide housing subsidies.

Wen’s comments “boosted sentiment but this is nothing different from what he had said back in December,” Helen Zhu, a strategist at Goldman Sachs Group Inc., said in a Bloomberg Television interview in Hong Kong. “Policy makers actually have a lot of different policy areas they can fine tune.”

The Shanghai Composite Index slipped 0.13 point, or less than 0.1 percent, to 2,351.85 at the close. About five stocks rose for every two that fell on the measure. The CSI 300 Index lost 0.1 percent to 2,531.98. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, retreated 1.2 percent on Jan. 10 in New York.

The Shanghai index advanced 0.9 percent last 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 reduction 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.

Poor Economic Data

China will increase policy support in the areas of fiscal and taxation, financial and pricing for the sea water desalination industry and projects, according to a State Council statement posted on the government’s website today.

Shuangliang Eco-Energy jumped 4 percent to 8.24 yuan, its highest close since Dec. 21. China Gezhouba Group Co. added 0.5 percent to 8.14 yuan. Anhui Water Resources Development Co. rose 0.7 percent to 13.94 yuan.

China’s economic circumstances in January and the first quarter deserve attention, Premier Wen told business executives last week in Beijing, the official Xinhua News Agency reported yesterday.

Wen’s remarks may fuel speculation that the government will soon ease policy to preserve growth in the world’s second- biggest economy. New lending missed estimates by 26 percent in January and money supply grew the least in more than a decade, according to data released by the central bank on Feb. 10 after the market closed.

Bank Loans

Chinese banks extended 738.1 billion yuan ($117 billion) of new yuan-denominated loans last month, the People’s Bank of China said in a statement. That compares with the median forecast of 1 trillion yuan in a Bloomberg News survey of 26 economists and 641 billion yuan in December.

New lending may rebound to 830 billion yuan this month and 840 billion yuan in March as money flows back to banks as deposits, Ni Jun, an analyst at Shenyin & Wanguo Securities Co., wrote in a report today.

China’s A shares may catch up with the rally in global equity markets if the government takes “pre-emptive” policy measures such as a cut in reserve ratios within the next few months, according to Citigroup Inc.

Stocks Held ‘Hostage’

The nation’s yuan-denominated shares have been held “hostage” by the government’s slower-than-expected policy moves, Minggao Shen and Ben Wei, Citigroup analysts, said in a report dated today. “Unless the Chinese authorities are ready to accept a slower pace of growth, headline easing is drawing near,” they said.

Western Mining, China’s fourth-largest maker of zinc concentrate, gained 0.5 percent to 10.69 yuan. Shenzhen Zhongjin Lingnan Nonfemet Co., the nation’s third-largest zinc producer, added 1.2 percent to 10.13 yuan.

Greek Prime Minister Lucas Papademos won parliamentary approval for austerity measures to secure a 130 billion euro ($172 billion) international bailout as rioters protesting the cuts battled police and set fire to buildings in Athens.

Passage of the austerity bill puts the spotlight on a meeting of euro-region finance ministers on Feb. 15 that must decide whether to approve the second aid package.

Europe is China’s biggest export market, making up about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities.

Property Curbs

A measure of property stocks in the Shanghai Composite declined 1.8 percent, the most among the five industry groups.

Vanke, the nation’s biggest listed property developer, slumped 1.9 percent to 7.70 yuan. Poly Real Estate, the second largest, tumbled 3.1 percent to 10.57 yuan. Gemdale Corp. retreated 2.9 percent to 5.40 yuan.

The mid-sized city of Wuhu in Anhui province will temporarily suspend a home subsidy policy so it can study details on how to implement the rules, according to a statement on the local authority’s website yesterday. Wuhu will waive a deed tax and subsidize some home purchases, it said Feb. 9, becoming the first Chinese city this year to signal its intention to ease property curbs.

Wuhu’s reversal shows the stock market has “severely underestimated” the central government’s political will to cool the housing market further, Jinsong Du, an analyst at Credit Suisse Group AG, wrote in a note to clients.

Hong Kong Discount

China won’t waver on its real-estate curbs, which aim to bring home prices to a reasonable level, Xinhua quoted Premier Wen as saying in yesterday’s report.

The nation’s stocks may trade at a discount to their Hong Kong counterparts for the first time in five years as share transactions drop in Shanghai.

Companies in the Shanghai A-Share Stock Price Index traded at 9.4 times on Feb. 7, compared with 8.5 times for the Hang Seng China Enterprises Index, data compiled by Bloomberg show. That 11 percent premium is the least since February 2007. An average $1.94 billion more shares changed hands daily in Shanghai than securities on the Hong Kong stock exchange the past 100 days, near the lowest level since January 2009. The H- shares gauge has rallied 16 percent this year.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., slipped 2.9 percent to $38.93 on Feb. 10, the lowest since Jan. 31. The fund slumped 3.9 percent last week.

--Zhang Shidong. With assistance from Weiyi Lim in Singapore. 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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