Bloomberg News

China Stocks Rise Most in Five Weeks After Trading Fees Reduced

August 03, 2012

China’s stocks rose the most in five weeks as a cut in transaction fees on share trading overshadowed the failure of central banks in China, Europe and the U.S. to take immediate steps to support growth.

Sinolink Securities Co. paced gains by brokerages on speculation the 20 percent reduction in fees will boost trading. Poly Real Estate Group Co. (600048), the nation’s second-largest property developer, rallied 1.8 percent after the Beijing Times said speculation China may ban the selling homes before they are completed is a rumor. SAIC Motor Corp., China’s largest carmaker, sank 3.8 percent as the nation’s vehicle inventories rose to a four-month high.

“The cut in transaction fee will boost the efficiency of trading in China but it doesn’t help to improve the economy,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “We need more policies that aid the economy and that will drive liquidity to the market.”

The Shanghai Composite Index rose 1 percent to 2,132.80 at the close. The gauge gained 0.2 percent this week, snapping a six-week losing streak. The CSI 300 Index (SHSZ300) added 0.8 percent to 2,353.74. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, lost 0.8 percent to 85.67 in New York yesterday.

The Shanghai Composite has tumbled 13 percent from this year’s high on March 2 amid concern the economic slowdown is deepening and Europe’s debt crisis is worsening. Europe is China’s largest export market, making up 18 percent of the nation’s overseas sales, according to Shenyin & Wanguo Securities Co.

European Central Bank President Mario Draghi yesterday declined to intervene in bond markets, while China’s central bank said it will pursue a “prudent” policy and the Federal Reserve a day earlier refrained from adding fresh stimulus.

Trading Fees

Sinolink gained 3.2 percent to 11.99 yuan, the biggest advance since June 13. Northeast Securities Co. advanced 5.2 percent to 17.12 yuan.

The cut in transaction fees will save investors 600 million yuan ($94 million) in the final four months of the year, the China Securities Regulatory Commission said on its website yesterday. Separately, the official Xinhua News Agency said that China is also considering reducing stamp duty on share trading.

The lower fees are the latest measure to boost investor sentiment. The CSRC in recent months urged listed companies to pay more cash dividends and changed how initial public offerings are priced. Publicly traded companies, especially those whose stock prices are below their book values, have obligations to buy back shares, the China Securities Journal said yesterday, citing an unidentified CSRC official.

‘Prudent’ Policy

China’s central bank said it will keep pursuing a “prudent” monetary policy and the nation’s economy will maintain stable growth even amid the risk the global recovery will falter. The government will conduct policy fine-tuning at an appropriate time and consumer inflation may rebound after August, the People’s Bank of China said in a quarterly monetary- policy report on its website yesterday.

The PBOC has cut interest rates twice since early June and lowered lenders’ reserve requirement ratio three times starting in November as part of the government’s efforts to boost credit and support economic expansion.

The property index rose 1.4 percent. Poly Real Estate increased 1.8 percent to 10.48 yuan. Shanghai Lujiazui Finance & Trade Zone Development Co. advanced 1.2 percent to 11.17 yuan.

China’s property stocks will probably slump a further 20 percent after sinking the most in more than 18 months yesterday as the government takes steps to cool the real-estate market, Bocom International Holdings Co.’s Hao Hong said.

‘Strong Headwinds’

A gauge of property stocks in the Shanghai Composite Index sank 4.9 percent yesterday, the most since Jan. 17, 2011, amid speculation the government will introduce a capital-gains tax on owners and ban developers from selling properties before they are built, Hong, Bocom’s Hong Kong-based managing director for research, said in an interview yesterday.

“Property stocks are running into strong headwinds,” said Hong, the only strategist among 13 brokerages surveyed by Bloomberg at the start of the year who forecast declines for Chinese stocks in 2012. “I’m not touching them.”

SAIC Motor fell 3.9 percent to 12.38 yuan. FAW Car Co. retreated 2.3 percent to 8.86 yuan. China’s vehicle inventory index rose to the highest level in four months in June, the China Automobile Dealers Association said in a statement on their website on Aug. 1. According to global standards, an index reading above 1.5 indicates inventories have reached “cautionary levels,” the association said.

Thirty-day volatility in the Shanghai Composite index (SHCOMP) was at 13.7. About 5.4 billion shares changed hands in the gauge yesterday, 29 percent lower than the average this year. The index is valued at 9.5 times estimated profit, compared with the three-year average of 14.6.

The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., slid 1 percent to $33.96, snapping a two-day increase.

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

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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