Bloomberg News

China Stocks Rise to 2-Month High as Leaders Vow to Help Europe

February 16, 2012

Feb. 15 (Bloomberg) -- China’s stocks rose to a two-month high after Premier Wen Jiabao and the central bank governor said they will help Europe resolve its debt crisis, easing concerns an export slowdown will worsen and curb growth.

Jiangxi Copper Co. and Aluminum Corp. of China Ltd. led a rally for metal producers after China pledged to invest in Europe’s bailout funds and sustain its holdings of euro assets. China Cosco Holdings Co., the world’s largest operator of dry- bulk ships, rose to its highest in two months on optimism Greece will commit to budget cuts to secure a second bailout package. Pingdingshan Tianan Coal Mining Co. advanced 2.6 percent after Shenyin & Wanguo Securities Co. recommended buying the stock.

“In the short term, they will get the funding and they will still survive,” Khiem Do, Hong Kong-based head of multi- asset strategy at Baring Asset Management Ltd., said in an interview on Bloomberg Television, referring to Greece. “As people don’t think China is going to hard-land, they’ll have to buy Asian emerging equities.”

The Shanghai Composite Index added 21.93 points, or 0.9 percent, to 2,366.70 at the close, the highest since Dec. 1. The CSI 300 Index gained 1.1 percent to 2,549.61. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, slid 0.2 percent in New York.

The Shanghai Composite has rebounded 10 percent from a Jan. 5 low on speculation the central bank will further cut lenders’ reserve-requirement ratios to spur economic growth. It announced a reduction in reserve ratios on Nov. 30, the first since 2008, after boosting them and interest rates last year to cool inflation.

‘Sincere and Firm’

“China will always adhere to the principle of holding assets of EU sovereign debt,” People’s Bank of China Governor Zhou Xiaochuan said in a speech in Beijing today. “We would participate in resolving the euro debt crisis,” he said, echoing comments by Premier Wen yesterday.

Wen said at yesterday’s joint press conference with European Union President Herman Van Rompuy the nation is willing to get “more deeply” involved in resolving Europe’s debt crisis, although the continent must send a clearer message to show how it’s working to strengthen its finances.

“China’s willingness to support Europe to cope with sovereign debt problems is sincere and firm,” he said. “China is ready to get more deeply involved in participating in solving the European debt issue.”

A measure of 54 material stocks in the CSI 300 advanced 1.4 percent. Jiangxi Copper, China’s biggest producer of the metal, rose 1.6 percent to 26.78 yuan. Chalco, the listed unit of the biggest maker of the lightweight metal, gained 1.8 percent to 7.29 yuan. Huludao Zinc Industry Co., the nation’s second- largest zinc producer, climbed 1.1 percent to 5.74 yuan.

Shippers Rally

European finance ministers canceled a Brussels meeting slated for today and will hold a teleconference instead to prod Greece to do more to clinch an aid package worth 130 billion euros ($170 billion) along with about 100 billion euros of debt relief from private bondholders. Greece needs the aid to make a 14.5 billion-euro bond payment on March 20.

Europe is China’s biggest export market, making up about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co. The Baltic Dry Index, a measure of commodity shipping costs, rose for a seventh session yesterday as demand to transport crops from South America helped to reduce the supply of vessels.

China Cosco jumped 3.5 percent to 5.58 yuan, the highest since Dec. 13. China Shipping Development Co., a unit of the second-biggest sea-cargo group, added 3.8 percent to 6.53 yuan. China Shipping Container Lines Co., the second- largest carrier of sea-cargo boxes, surged 4 percent to 2.89 yuan.

Coal Stocks

“The rebound in shipping stocks could continue should the economies of Europe and the U.S. sustain their recovery and cargo volumes improve from the second half of February,” Du Jianping, an analyst at Bank of China Ltd., wrote in a report.

Pingdingshan Tianan Coal, the listed unit of China’s fifth- largest producer of the coal, advanced 2.6 percent to 12.60 yuan. Shenyin & Wanguo Securities raised the rating on the stock to “buy” from “neutral,” Liu Xiaoning, an analyst at the Shanghai-based brokerage, said in a report dated today.

The brokerage’s estimated price-to-earnings ratio for the coal producer this year of 13 times is lower than the industry average of 15 times, according to the report. Shenyin & Wanguo set a share-price estimate of 15.5 yuan.

The Shanghai Composite’s 7.6 percent rally this year may falter as a so-called rising wedge pattern mirrors previous failed rebounds, according to Thomas Schroeder, managing director at Chart Partners in Bangkok. A rising wedge pattern refers to a trading range on a chart that begins wide at the bottom and contracts as prices move higher.

“Our concern stems from the current rising wedge similarity to previous false bounces and odds of a failed breakout or failure at the topside of the wedge near 2,375,” he said. “The price action is not that constructive which increases odds that this bounce is like previous formations and a head-fake rally.”

--Zhang Shidong. Editors: Allen Wan, Matthew Oakley

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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