Bloomberg News

China’s Stocks Climb to Two-Week High on Stimulus Speculation

May 29, 2012

China’s stocks rose, driving the benchmark index to a two-week high, on speculation the government will take more steps to halt slowing economic growth.

Great Wall Motor Co. (601633) advanced 6.4 percent as it was named among auto companies by BNP Paribas SA that may benefit from government subsidies. Hisense Electric Co. (600060) climbed to a one- month high after the Ministry of Finance said the nation will subsidize the use of energy-saving products. China Vanke Co., the country’s largest publicly traded developer, rose 1.1 percent as China International Capital Corp. said the central bank may cut lending rates as early as next month.

“There are expectations China will introduce more stimulus to boost the economy,” said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. “There’s optimism the economy will recover in the second half.”

The Shanghai Composite Index (SHCOMP) rose 1.2 percent to 2,389.64 at the close, its highest since May 11. Thirty-day volatility in the gauge was at 15.12 today, the highest in more than a week. The CSI 300 Index (SHSZ300) advanced 1.4 percent to 2,650.85.

Today’s gain trimmed the Shanghai Composite’s loss this month to 0.3 percent. The index has climbed 8.6 percent this year on optimism the government will ease monetary policies and accelerate approvals of infrastructure projects to spur growth.

The Chinese government’s stimulus in response to the nation’s economic slowdown will probably range from 1 trillion yuan ($157.6 billion) to 2 trillion yuan, half the size of 2008’s package, Credit Suisse Group AG said yesterday. China has no intention to introduce a large-scale stimulus like it did during the global financial crisis in response to this year’s slowdown, the official Xinhua News Agency said today.

Auto Subsidies

Great Wall Motor, China’s biggest pickup truck maker, advanced 6.3 percent to 17.37 yuan after BNP named it as among possible beneficiaries from Chinese auto subsidies.

SAIC Motor Corp., the nation’s largest automaker, gained 0.7 percent to 15.65 yuan. Chongqing Changan Automobile Co. (000625), the Chinese partner of Ford Motor Co. and Mazda Motor Corp., climbed 1.9 percent to 5.48 yuan.

China’s cabinet agreed to revive financial incentives for consumers to trade in their passenger cars to help increase demand in the world’s biggest vehicle market, a government official said yesterday. The State Council approved a cash-for- clunkers plan last week and relevant ministries are working on details, said the official, who asked not to be identified because the matter hasn’t been made public.

Hisense, China’s biggest manufacturer of flat-panel televisions, surged 5.9 percent to 18.88 yuan, its highest close since April 20. Qingdao Haier Co. (600690), the nation’s largest refrigerator maker, climbed 2.6 percent to 12.19 yuan. Hefei Rongshida Sanyo Electric Co., a manufacturer of washing machines, gained 2 percent to 9.24 yuan.

Boosting Consumption

The promotion of energy efficient flat-panel televisions and energy-saving air conditioning is projected to stimulate consumption of more than 135 billion yuan, the Ministry of Finance said in a statement yesterday.

Stocks in the Shanghai Composite are valued at 10.3 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg. About 9.5 billion shares changed hands in the measure yesterday, 20 percent higher than the daily average this year. The MSCI BRIC Index, which tracks stocks in Brazil, Russia, India and China, is valued at 8.2 times estimated profit.

Vanke added 1.1 percent to 9.27 yuan on optimism lower lending rates will boost property demand. China Merchants Property Development Co., the third-biggest developer by market value, advanced 1.8 percent to 25.44 yuan. Hangzhou Binjiang Real Estate Group Co. (002244) gained 3.5 percent to 9.76 yuan.

European Concern

The People’s Bank of China may reduce the lending rate as soon as June, Xu Xiaoqing, Liu Mingxi and Chen Jianheng, analysts at CICC, wrote in a report yesterday. A deposit rate cut may follow in the second half of the year on easing inflation, it said.

The MSCI Asia Pacific Index rose 1.3 percent today as expectations about China’s stimulus plans tempered concern Europe’s debt crisis will worsen. In Europe, at least 25 percent of leveraged buyout companies with debt due by the end of 2015 may default as the economy worsens, Moody’s Investors Service said.

Spain is trying to shore up its banks and help cash- strapped regions while its own borrowing costs compared with Germany’s are the highest since the creation of the euro. As Spain’s narrowing market access depends on domestic lenders financed by the European Central Bank, the government is considering using public-debt securities rather than cash to fund a 19 billion-euro ($24 billion) bailout of BFA-Bankia.

Dalian Port (PDA) Co. (601880) dropped 1.8 percent to 3.25 yuan and Rizhao Port Co. (600017) lost 1.3 percent to 3.15 yuan amid speculation trade flows to Europe may slow. The region is China’s biggest export market, accounting for about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.

To contact the reporters on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net; 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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