Bloomberg News

China’s Stocks Rebound After Yesterday’s Plunge

March 05, 2013

Chinese stocks rebounded after the CSI 300 Index (SHSZ300)’s biggest drop in two years and as the government pledged to increase fiscal spending to support economic growth.

China Minsheng Banking Corp. climbed 7.5 percent after slumping the most since 2008 yesterday. Kangmei Pharmaceutical Co. led a rally for drugmakers on the prospect of increased health-care spending. During today’s start of the National People’s Congress, the government announced it would keep its economic growth target at 7.5 percent, unchanged from 2012, while projecting a 10 percent jump in fiscal spending to fund areas such as health care, agriculture and education.

The CSI 300 Index jumped 3 percent to 2,622.81 at the close, while the Shanghai Composite Index (SHCOMP) rose 2.3 percent to 2,326.31. The Hang Seng China Enterprises Index (HSCEI) climbed 1 percent after sliding 2.1 percent yesterday.

“There’s expectation the new government will spend more and introduce more reforms to focus on the health of the people,” Zhang Gang, a strategist at Central China Securities Holdings Co. in Shanghai, said by phone. “ Moreover, we fell too much yesterday so there’s some buying back.”

The CSI 300 tumbled 4.6 percent yesterday, the most since November 2010, after the government ordered more measures to cool property prices and growth in the nation’s services industries slowed. The gauge is up 4 percent for the year and trades for 10.4 times projected 12-month earnings, compared with the MSCI Asia Pacific index’s 13.3 times, according to data compiled by Bloomberg. The CSI 300 has rallied 24 percent since the start of a bull-market rally on Dec. 3.

Congress Speech

The CSI 300 Financial Index (SZ399914) climbed 5.1 percent after tumbling 6.5 percent yesterday. Minsheng Banking rose to 10.20 yuan. Ping An Bank Co., which is scheduled to report earnings on March 7, advanced 10 percent to 23.93 yuan.

Premier Wen Jiabao set an inflation goal of 3.5 percent for this year in his final opening address to almost 3,000 lawmakers at the annual meeting of the NPC. An annual expansion target of 8 percent was in place from 2005 to 2011. Last year’s inflation goal was 4 percent. The economy expanded 7.8 percent last year, the weakest pace since 1999.

A gauge of health-care stocks in the CSI 300 gained 3.1 percent. Kangmei advanced 4.4 percent to 17.53 yuan. Zhejiang Medicine Co. jumped 6.3 percent to 23.19 yuan.

Fiscal spending is targeted to rise 10 percent to 13.8 trillion yuan, the Ministry of Finance said in a report presented to the NPC. The government will ensure funding for key areas such as agriculture, education, medical and health care, social security, employment, government-subsidized housing and public culture, it said.

Proactive Policies

The nation plans to run a budget deficit of 1.2 trillion yuan in 2013, amounting to about 2 percent of gross domestic product, the report said. Last year’s deficit was 800 billion yuan. The 2 percent target signals a “proactive” fiscal policy, Bank of America Corp.’s China economist Lu Ting wrote in a note.

Chongqing Brewery Co. jumped 10 percent to 17.53 yuan after trading for the first time since Feb. 25. Carlsberg A/S, which already owns a 29.7 percent stake in the Chongqing municipality- based brewer, will offer 20 yuan a share for a further 30 percent stake in the maker of Shancheng beer, it said yesterday.

A gauge of developers in the Shanghai Composite rose 0.5 percent after plunging 9.3 percent yesterday, the most since June 2008. China Vanke Corp., the nation’s biggest developer, advanced 0.5 percent to 10.89 yuan.

Property Concern

China will boost supply of medium, small-sized homes this year and keep differentiated curbs, home mortgage and tax policies, the National Development and Reform Commission said today. The government will steadily curb speculative property demand and gradually expand a property tax trial, it said.

A 6.9 percent slump by the CSI 300 Financial Index in the past month is signaling the end to a bull-market rally as the government takes steps to prevent asset bubbles. The cabinet on March 1 ordered individuals selling properties to “strictly” pay a 20 percent tax on profits from sales.

“The stock rally is over,” Zhou Binglin, a senior economist at Guosen Securities Co. in Shenzhen, said March 1. Banks and developers are “leading indicators,” with real estate accounting for about 20 percent of the economy, he said.

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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