Bloomberg News

China’s Stocks Rise, Capping Sixth Week of Gains, as Property Shares Surge

February 24, 2012

China’s stocks rose, capping a sixth week of gains for the benchmark index, on speculation local governments are relaxing restrictions on the property market and an improving global economy will spur Chinese exports.

Poly Real Estate Group Co. (600048) jumped 3.5 percent today, leading a gauge of developers to the biggest advance by an industry group this week, after Shanghai said it will implement differentiated tax and mortgage policies. Anhui Conch Cement Co. climbed to a three-month high on prospects low-income housing construction will boost cement demand. China Shenhua Energy Co. (601808) and China Coal Energy Co. (601898) led gains for coal stocks on expectations easing liquidity will boost demand for energy as a cut in banks’ reserve requirements takes effect today.

“Expectations are that monetary policy easing will help the economy hit bottom soon,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “Data from the U.S. are very supportive for stocks. The rebound will carry on.”

The Shanghai Composite Index (SHCOMP) climbed 30.07 points, or 1.3 percent, to 2,439.63 at the close, the highest close since Nov. 17. Trading volume in the Shanghai gauge was 68 percent higher than average at this time over past 30 days, according to data compiled by Bloomberg. The CSI 300 Index (SHSZ300) rose 1.6 percent to 2,648.02. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 0.3 percent yesterday in New York.

Weekly Winning Stretch

The Shanghai Composite rallied 3.5 percent this week after the central bank announced a cut in reserve requirements last weekend, the second reduction in three months as investors speculated a credit crunch was curbing lending to small companies. The gauge’s weekly winning streak is the longest since November 2010.

The Shanghai index has rebounded 11 percent this year on expectations the government will ease monetary policies to bolster economic growth that cooled to the slowest pace in 2 1/2 years in the fourth quarter of 2011. The measure trades at 10 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg.

“We really like China,” Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Bank, said in a Bloomberg Television interview today. The nation’s stocks are the bank’s top pick because of a “pretty low” valuation after equities slumped last year, she said.

Investor interest in Chinese equities is increasing. The value of shares traded on the Shanghai stock exchange reaching the highest since Nov. 3 on Feb. 22, almost the double the daily average over the past 100 days, Bloomberg data showed, while new stock account openings jumped 19 percent to 187,748 accounts in the week ended ended Feb. 17, according to the China Securities Depository and Clearing Corp.

Property Stocks

A measure of property stocks in the Shanghai Composite jumped 3.9 percent today, adding to this week’s 9.3 percent gain, the most since October. Poly Real Estate, China’s second- largest developer by market value, rose 3.5 percent to 11.70 yuan today. China Vanke Co. (000002), the biggest, added 3.9 percent to 8.51 yuan. Hangzhou Binjiang Real Estate Group Co. surged 5.6 percent to 8.87 yuan.

Shanghai, China’s biggest commercial city, will implement differentiated taxation and mortgage policies for home buyers and will have increased affordable housing by 1 million units by 2015, according to a five-year housing plan posted on the city government’s website on Feb. 22. The Shanghai government also said this week it will allow some residence permit holders to buy second homes by loosening the definition of locals.

“The rally carried on as property easing signals from local governments loomed,” said Dai Fang, a Shanghai-based analyst at Zheshang Securities.

Construction Stocks

Falling home prices are fueling an attempt by China’s smaller cities to relax tightening on property policies. The eastern city of Wuhu was the first Chinese city this year to ease curb measures ordered by the central government by waiving a deed tax and subsidizing some home purchases. The move was suspended three days later, following the outcome of a similar attempt in October by Foshan in southern China.

Anhui Conch, whose materials are used in low-income housing, advanced 3.6 percent to 18.28 yuan. Huaxin Cement Co., an affiliate of Holcim Ltd., climbed 5.5 percent to 16.23 yuan. Tangshan Jidong Cement Co. (000401) surged 6.4 percent to 19.88 yuan.

The country’s leading economic indicator gained 1.6 percent to 225.7 in January from the previous month, the Conference Board said in a statement, citing a preliminary reading. The gauge rose 0.8 percent in December.

In the U.S., applications for jobless benefits were unchanged in the week ended Feb. 18 at 351,000, the fewest since March 2008, Labor Department data showed. Another report showed that a gauge of home prices jumped 0.7 percent in December, beating estimates. An industry report also showed German business confidence climbed.

Improving Liquidity

Europe and U.S. are China’s biggest export markets, making up 35 percent of the Asian nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.

A measure of energy stocks in the CSI 300 rose 2 percent today, the most among the 10 industry groups. Shenhua, the largest coal producer, added 1.3 percent to 28.12 yuan. China Coal, the second largest, rose 2 percent to 10.11 yuan. Datong Coal Industry Co. (601001), the third biggest, advanced 1.9 percent to 14.33 yuan.

The central bank announced a 0.5 percentage point cut in lenders’ reserve-ratio requirements on Feb. 18. Easing liquidity will boost demand for energy, said Wang Shi, a Shanghai-based coal analyst with Northeast Securities Ltd.

The seven-day repurchase rate, a gauge of funding availability in the financial system, tumbled 102 basis points to 4.48 percent as of 3:12 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That’s the biggest decline since Jan. 19.

--Zhang Shidong. With assistance from Bonnie Cao and Winnie Zhu in Shanghai. 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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