Bloomberg News

China’s Stocks Advance to One-Week High; Shale Gas Shares Climb

March 19, 2012

China’s stocks rose, driving the benchmark index to a one-week high, after International Monetary Fund official Zhu Min said China will avoid an economic hard- landing as investment remains strong.

Kingdream Public Ltd. (000825), whose businesses include gas distribution, jumped 10 percent after the government said it will boost development of the shale gas industry. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. advanced 4.3 percent, pacing a rally for producers of rare earth. China Vanke Co. (000002) and Poly Real Estate Group Co. led property developers to the biggest decline among industry groups in the Shanghai Composite Index after home prices posted the worst performance in a year.

“The government has the tools to offset a decline in economic growth such as monetary policy or measures targeting specific industries,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “The property market is still the biggest risk the economy is facing now.”

The Shanghai Composite (SHCOMP) rose 5.45 points, or 0.2 percent, to 2,410.18 at the close, its highest since March 13. The CSI 300 Index (SHSZ300) added 0.3 percent to 2,630.01. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, slid less than 0.1 percent in New York on March 16.

About 15.8 billion shares changed hands in the Shanghai Composite on March 16, or 25 percent higher than the daily average this year. Thirty-day volatility on the gauge was at 15.81, near the lowest in a week.

The Shanghai Composite retreated 1.4 percent last week, the biggest weekly loss since January. Still, the index has gained 9.6 percent this year on speculation the government will ease monetary policy to spur economic growth. Stocks in the index trade at 10 times estimated profit, compared with a record low of 8.9 times on Jan. 6, weekly data compiled by Bloomberg showed.

‘Soft-Landing’

“China’s heading for a soft-landing,” Zhu, a deputy managing director at the IMF, said in Hong Kong today. At the same conference, Reserve Bank of Australia Governor Glenn Stevens also expressed confidence in an economy he said is closing in on that of the U.S.

China is targeting a 7.5 percent expansion in gross domestic product this year, down from the 8 percent goal in place since 2005. Zhu’s comments contrast with JPMorgan Chase & Co. strategist Adrian Mowat saying last week that weakness in car sales and cement and steel production indicate the nation is already experiencing “a hard landing.”

Shale Gas

Kingdream Public surged by the maximum 10 percent to 14.92 yuan. Yantai Jereh Oilfield Services Group Co. (002353), which is involved in natural gas compression, gained 2.9 percent to 84.36 yuan. Zhangjiagang Furui Special Equipment Co. rose 4.4 percent to 44.15 yuan.

China will study and release “concrete” fiscal and tax supportive policies to promote and encourage the development of shale gas, according to a report by a newspaper owned by the Ministry of Finance that was posted to the ministry’s website today. The measures include increasing investment in shale gas resource appraisal and drafting subsidy policies for shale gas, it said.

Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., China’s biggest producer of rare earth, jumped for a second day, gaining 4.3 percent to 71.91 yuan. Rising Nonferrous Metals Share Co. surged 8.6 percent to 69.40 yuan.

China may start the trial use of specialized receipts for the rare earth industry in Inner Mongolia and Sichuan province in June this year, the Information Times reported, without saying where it got the information. This implies that the rare earth industry may be incorporated into a list of goods that can only be sold with government approvals, the report said.

Home Prices

A gauge of property stocks fell 0.4 percent. Vanke declined 0.6 percent to 8.22 yuan, while Poly Real Estate slid 0.8 percent to 10.73 yuan. February home prices posted the worst performance in a year with almost half of the cities monitored by the government falling from a year ago as the country maintained curbs on the property market.

New home prices fell in 27 of 70 cities last month from a year earlier and prices were unchanged in six cities, the national statistics bureau said in a statement on its website yesterday. That is the worst since the government began at the start of 2011 releasing individual data for 70 cities instead of a national average.

--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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