Bloomberg News

Most Chinese Stocks Gain on Speculation New Lending to Rebound

June 26, 2012

Most Chinese stocks rose, led by property companies and banks, as speculation new lending will rebound eased concerns over an economic slowdown and overshadowed a lower growth forecast from HSBC Holdings Plc.

Poly Real Estate Group Co. (600048) and Huaxia Bank Co. gained at least 1.3 percent after the Shanghai Securities News said June new loans may reach 1 trillion yuan ($157 billion). Shenzhen Chiwan Wharf Holdings Ltd. (200022) rallied 4 percent after the commerce ministry said trade growth is improving. SAIC Motor Corp. (600104) dropped to a three-month low after an official with the nation’s economic planning body said the government has no imminent plans to introduce more policies to revive vehicle demand.

“The market is speculating that figures in June will improve a bit, lessening the risk of a hard landing for the economy,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “That’s helping stocks rebound.”

Five stocks rose for every four that fell on the Shanghai Composite Index (SHCOMP), which dropped 0.1 percent to 2,222.07 at the close. The gauge slid for a fifth day today, the longest streak since the six days ended Dec. 15. The CSI 300 Index (SHSZ300) lost less than 0.1 percent to 2,454.92. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 2.7 percent in New York yesterday.

The Shanghai Composite has fallen 6.3 percent in June, poised for the worst monthly performance since March, on concern the first interest-rate cut since 2008 won’t be enough to prevent economic growth from missing the government’s target of 7.5 percent this year. Stocks in the measure are valued at 9.69 times estimated earnings, compared with the average of 17.8 since Bloomberg began compiling the data in 2006.

Quarterly Drop

The Shanghai gauge has lost 1.8 percent since the start of April, paring its gain this year to 1 percent. The index is headed for its fourth quarterly decline in five.

HSBC cut its 2012 growth estimate for China to 8.4 percent from 8.6 percent, economists Qu Hongbin and Frederic Neumann wrote in a note. China will step up policy easing measures in the coming months to avert a hard landing, they wrote. The move comes a day after Citigroup Inc. lowered its growth estimate for this year to reflect “anemic” domestic activity in the second quarter and further weakening of European demand.

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

German Chancellor Angela Merkel hardened her resistance to euro-area debt sharing, setting Germany on a collision course with its allies at a summit starting on June 28. In signs the debt crisis is worsening, Cyprus said it will seek a financial lifeline from the euro area’s firewall funds, and Greek Prime Minister Antonis Samaras consented to the resignation of his finance minister, Vassilios Rapanos.

Biggest Gains

A measure of banks, developers and insurers in the CSI 300 advanced 0.2 percent today, the most among the 10 industry groups. Poly Real Estate, China’s second-largest developer by market value, rose 2.7 percent to 11.24 yuan. China Merchants Property Development Co. (000024), the third biggest, jumped 4.5 percent to 24.47 yuan. Huaxia Bank, partly owned by Deutsche Bank AG, gained 1.3 percent to 9.40 yuan. Bank of Beijing Co. added 1.1 percent to 9.57 yuan.

China’s June new loans may be about 900 billion yuan to 1 trillion yuan, the Shanghai Securities News reported today. That would be a rebound from 793.2 billion yuan in May and 681.8 billion yuan in April.

The loans added to speculation the nation’s economic slowdown is easing. An index of leading Chinese economic indicators increased 1.1 percent in May from the previous month, the New York-based Conference Board said in an e-mailed statement today, citing a preliminary reading. That compares with a 0.9 percent gain in April.

Trade Growth

China can achieve a 10 percent gain in exports and imports this year if the world economy doesn’t worsen further, Shen Danyang, a commerce ministry spokesman, said at a briefing in Beijing today. Trade growth improved in June and had “sound momentum,” Shen said.

Shenzhen Chiwan Wharf, a port operator, climbed 4 percent to 10.92 yuan, the highest close since March 13. Shenzhen Yantian Port Holdings Co. (000088) gained 3.2 percent to 4.20 yuan.

The Shanghai Composite’s 14-day relative strength index, which measures how rapidly prices have advanced or dropped in that time period, dropped to 30.7 today. Readings below 30 indicate it may be poised to rise. About 6 billion shares changed hands in the Shanghai index yesterday, 31 percent lower than the daily average this year. Thirty-day volatility in the gauge was at 16 today, the highest level since May 14.

Shallow Slowdown

China’s economic growth hasn’t bottomed though the slowdown should be shallow, Jason Todd, Hong Kong-based global head of equity strategy at Religare Capital, wrote in an e-mail today. While China’s policy response is late, it’s not light relative to the deterioration in data, he wrote.

SAIC Motor fell 0.8 percent to 14.10 yuan, the lowest close since March 28. FAW Car Co. (000800), which makes passenger cars in China with Volkswagen AG, dropped 0.4 percent to 10.90 yuan.

The National Development and Reform Commission is still studying the feasibility of measures to subsidize vehicle purchases in rural areas, said Chen Jianguo, deputy director of the agency’s industry coordination department.

“We’re still looking into the issue of whether such policy is even needed,” Chen said yesterday in an interview in Dalian, China. “It is common sense” that there’s no need for the same kind of stimulus policies introduced in 2009.

Internet companies led declines in Chinese stocks traded in the U.S. yesterday. The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., slid 2.2 percent to $31.83, the lowest level since October.

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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