Bloomberg News

China’s Stocks Rise Most in Five Weeks on CSRC’s Market Measures

August 06, 2012

China’s stocks rose, driving the biggest gains for the benchmark index in five weeks, after regulators broadened measures to boost investor confidence and a report showed American payrolls climbed more than forecast.

Jiangxi Copper Co. (600362), the biggest Chinese producer of the metal, climbed 5.1 percent on the prospect of higher commodities demand. Xiamen Tungsten Co. (600549) jumped by the 10 percent daily limit after the Shanghai Securities News said it will play a leading role in the consolidation of the rare-earth industry in Fujian province. Shanghai Zhangjiang Hi-Tech Park Development Co. surged the most in a year after the government approved the expansion of an over-the-counter stock market.

The Shanghai Composite Index (SHCOMP) rose 1 percent to 2,154.92 at the close, its biggest gain since June 29. The CSI 300 Index (SHSZ300) climbed 1.4 percent to 2,385.61. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 2 percent on Aug. 3.

“More listed companies and their employees are likely to buy their own shares as stocks are pretty attractive in terms of valuations and have long-term investment values,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Though the securities regulator is hammering out a spate of measures to support equities, the market focus is still on when economic growth will bottom and pick up.”

The Shanghai index has dropped 2 percent this year on concern about a deepening slowdown after the economy grew 7.6 percent in the second quarter, the slowest pace since 2009. The People’s Bank of China cut interest rates twice since early June and lowered lenders’ reserve requirement ratios three times starting in November as part of the government’s efforts to spur credit growth and support the economic expansion.

CSRC Measures

China plans to let workers choose for as much as 30 percent of their wages to be paid in the shares of their publicly traded employers. The stock used to pay employees must be acquired from the secondary market, according to draft rules posted on the China Securities Regulatory Commission’s website yesterday. Employees who receive shares as salaries or bonuses would have to hold them for at least 36 months.

The securities regulator, in the week following a July 31 pledge by the Communist Party’s Politburo to continue adjusting policies to ensure growth, has cut trading fees for stocks and expanded a trial for over-the-counter exchanges.

The measures signal intensifying government efforts to bolster equities after the Shanghai Composite tumbled 13 percent through Aug. 3 from this year’s high on March 2 amid concern the economic slowdown is deepening. The index is valued at 9.7 times estimated profit, compared with the 17.5 average since Bloomberg began compiling the data in 2006.

Commodity Stocks

A measure of material stocks in the CSI 300 advanced 3.1 percent today, the most among the 10 industry groups.

Jiangxi Copper, China’s biggest producer of the metal, added 5.1 percent to 21.50 yuan. The company said it plans to offer its shareholders cash dividends of no less than 10 percent of the annual attributable profit from 2012 to 2014.

Aluminum Corp. of China Ltd., the listed unit of nation’s biggest maker of the lightweight metal, gained 1.9 percent to 6.05 yuan. Zhuzhou Smelter Group Co., China’s biggest producer of refined zinc, surged 10 percent to 8.15 yuan.

UBS AG says the Shanghai Composite, this year’s worst performer in the largest emerging markets, will jump as much as 20 percent by year-end, while Haitong Securities Co. expects the measure to keep tumbling as economic growth slows.

UBS, Haitong Views

At least one more interest-rate cut by Chinese policy makers in the third quarter will help the Shanghai Composite rebound, Chen Li, UBS’s head of China equity strategy, said in an Aug. 3 interview.

Chen Ruiming, an equity strategist at Haitong Securities, China’s second-biggest brokerage by market value, said he expects the Shanghai Composite to fall below 2,000 this year, as exports slump and government measures to curb property prices hurt the industry. That’s equal to a drop of more than 6 percent from the Aug. 3 close.

China’s statistics bureau is due to release July economic data including industrial production and inflation on Aug. 9.

The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong jumped 1.4 percent after U.S. payrolls increased 163,000 last month following a revised 64,000 rise in June. Economists projected a gain of 100,000. Unemployment rose to 8.3 percent.

Rare Earth

The U.S. is China’s second-largest export market, making up about 17 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.

Xiamen Tungsten surged by 10 percent to 41.87 yuan. The company was asked by Fujian province to play a leading role in rare earth industry consolidation, the Shanghai Securities News reported today, citing a local government plan. The government will give financial support to Xiamen Tungsten, it said.

Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., China’s biggest producer of rare earth, rose 9.4 percent to 41.46. Rising Nonferrous Metals Share Co. advanced 7.1 percent to 62.86 yuan.

Thirty-day volatility in the Shanghai Composite was at 14.3 today, compared with this year’s average of 17.7. About 5.3 billion shares changed hands in the gauge on Aug. 3, 35 percent lower than the daily average this year.

Shanghai Zhangjiang Hi-Tech climbed 9.7 percent to 8.13 yuan, the biggest gain since July 18, 2011. Tianjin Hi-Tech Development Co. (600082) jumped by 10 percent to 4.48 yuan. Wuhan East Lake High Technology Group Co. surged 10 percent to 7.26 yuan.

The State Council has approved the expansion of OTC market trials to the cities of Shanghai, Wuhan and Tianjin from just Beijing, the China Securities Journal reported Aug. 3, citing the CSRC. Beijing’s OTC market trial began in 2006, according to the city government.

--Zhang Shidong. Editors: Allen Wan, Richard Frost

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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