Bloomberg News

China Stocks Rise to Two-Week High as Developers Advance

April 11, 2012

China’s stocks rose, driving the benchmark index to a two-week high, as speculation property sales and new lending will rebound overshadowed concern Europe’s debt crisis is worsening.

Poly Real Estate Group Co. (600048) led a gauge of developers to its highest close in almost a month. FAW Car Co., which makes passenger cars in China with Volkswagen AG, advanced 2.9 percent before an industry report on the nation’s March car sales. Chongqing Three Gorges Water Conservancy and Electric Power Co. sank 1.6 percent, pacing declines among Chongqing-based companies after the city’s former top official Bo Xilai was suspended from his Communist Party posts.

“The market is expecting the government to support the economy by measures like offering discounts on mortgage rates or boosting lending if the economy continues to slow down,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “Stocks may find support at this level due to the policy outlook.”

About four stocks gained for every three that fell in the Shanghai Composite Index (SHCOMP), which closed 0.1 percent higher at 2,308.93, the highest level since March 27. The CSI 300 Index (SHSZ300) added less than 0.1 percent to 2,520.04. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 2.5 percent in New York yesterday.

Pro-growth Measures

The Shanghai index reversed a loss of as much as 1.2 percent in the last hour of trading yesterday to close 0.9 percent higher as some investors said measures may be introduced at today’s regular meeting of the State Council, or cabinet. About 6.7 billion shares changed hands in the gauge yesterday, 23 percent lower than the daily average this year.

The Shanghai Composite has gained 5 percent this year on speculation the government will cut lenders’ reserve requirements and interest rates to boost the economy. Stocks in the gauge are valued at 9.7 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg. Thirty-day volatility was at 17.7 today, near the lowest level this month.

A measure of property stocks in the Shanghai Composite advanced 0.9 percent to its highest close since March 13. Poly Real Estate, China’s second-largest developer by market value, gained 1 percent to 11.78 yuan. The company said on April 9 contracted sales jumped 47 percent last month.

Poly’s March Sales

China Vanke Co., the biggest developer, added 0.8 percent to 8.49 yuan. China Merchants Property Development Co., the third largest, rose 2.4 percent to 21.70 yuan.

“The lending data for last month might be better than expected, while property is a direct beneficiary if loans improve,” Cui Juan, a Beijing-based analyst at Minzu Securities Co., said by phone today. “Home sales in March also rebounded from previous months.”

New loans may have reached 900 billion yuan ($143 billion) in March, exceeding the amounts in the first two months of 2012, the China Securities Journal reported on April 9. The central bank may release the figure as early as today.

FAW Car gained 2.9 percent to 10.96 yuan. Jiangling Motors Corp., the Chinese commercial vehicle partner with Ford Motor Co., climbed 1.9 percent to 22.07 yuan. BYD Co., the automaker part-owned by Warren Buffett’s Berkshire Hathaway Inc., jumped 6.5 percent to 30.60 yuan.

China’s passenger-car sales grew 4.5 percent in March, beating analyst estimates, the China Association of Automobile Manufacturers said today in a statement after the market closed. Sales were forecast to increase 3.9 percent, according to the average estimate of a Bloomberg News survey of eight analysts.

European Debt

Chinese equities fell earlier today as Spanish bonds slumped after Economy Minister Luis de Guindos declined to rule out a rescue and Bank of Spain Governor Miguel Angel Fernandez Ordonez said the nation’s lenders may need more capital if the economy weakens more than expected.

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

Chinese trade data yesterday showed an unexpected surplus for March and slowing growth in imports and exports. Overseas shipments rose 8.9 percent last month, more than economists’ forecast. Still, it was down from 18.4 percent growth in February.

“The slowdown in export growth was broad-based with the biggest drag coming from Europe, driven by the sovereign debt crisis that remains to be fully resolved,” HSBC Holdings Plc economists Xiaoping Ma and Hongbin Qu said in a report yesterday. Exports to the European Union contracted by 3.1 percent in March, it said.

Economic Data

Net exports may become a major drag on economic growth in the first quarter, reinforcing the need for further policy easing, according to the report.

The statistics bureau is due to report the nation’s first- quarter gross domestic product and other March data including industrial production on April 13. The economy probably grew 8.4 percent in the first three months of the year, according to the median estimate of 38 economists surveyed by Bloomberg. The economy expanded 8.9 percent in the fourth quarter of 2011, the least in 10 quarters.

Chongqing Three Gorges lost 1.6 percent to 14.39 yuan. Chongqing Brewery Co. (600132) slid 0.9 percent to 28.09 yuan.

Murder Suspect

Gu Kailai, Bo’s wife, and a domestic helper are “highly suspected” of killing British businessman Neil Heywood, who died in Chongqing in November, Xinhua reported late yesterday. The U.K. was originally told that Heywood died of alcohol poisoning.

“That may put some pressure on Chongqing-related companies,” said Li of Central China Securities.

Chinese equities (CH55BN:US) in the U.S. slid to a two-month low, led by consumer stocks, as import growth that trailed economists’ estimates added to concern that the world’s second-largest economy is faltering.

The Bloomberg China-US 55 Index dropped to the lowest level since Jan. 31 yesterday. The IShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., sank 1.7 percent in its second day of declines to a three-month low of $35.75.

--Zhang Shidong. With assistance from Bonnie Cao in Shanghai. Editor: 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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Companies Mentioned

  • CH55BN
    (Bloomberg China-US Equity Index)
    • $112.8 USD
    • -1.22
    • -1.08%
  • FXI
    (iShares China Large-Cap ETF)
    • $39.87 USD
    • -0.41
    • -1.04%
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