Bloomberg News

China’s Stocks Erase This Year’s Losses as New Credit Increases

February 17, 2014

China’s stocks rose, with the benchmark index erasing this year’s losses, after record new credit in January eased concern that the world’s second-largest economy will slow.

Xi’an Aero-Engine Plc jumped by the 10 percent daily limit, leading an advance by defense companies on speculation the government will boost military spending. Liquor maker Kweichow Moutai Co. climbed 5 percent as consumer shares rallied. Shandong Gold Mining Co. (600547) gained among gold producers after the metal increased to a three-month high. Aggregate financing, the broadest measure of credit, was 2.58 trillion yuan ($425 billion), the central bank said Feb. 15.

The Shanghai Composite Index (SHCOMP) rose 0.9 percent to 2,135.42, its highest closing level in two months. The gauge erased a 5.9 percent drop this year as the loan figures and improving trade in January offset signs of a slowdown in manufacturing. The Hang Seng China Enterprises Index (HSCEI) gained 1.7 percent.

“Strong credit growth confirms the economy is at the gradual recovery stage,” said Wu Kan, a money manager at Dragon Life Insurance Co., which oversees about $3.3 billion. “Ample liquidity is good for equities and may lift valuations.”

Volumes on the Shanghai Composite were 66 percent above the 30-day average today. The gauge is valued at 10.8 times reported earnings after reaching a record low 10 last month, according to data compiled by Bloomberg. The benchmark index rose 3.5 percent last week, the most since September.

The CSI 300 Index gained 0.7 percent to 2,311.65. The Bloomberg China-US Equity Index, the measure of the most-traded U.S.-listed Chinese companies, added 0.2 percent in New York on Feb. 14.

Credit Growth

New local-currency lending was 1.32 trillion yuan, the highest level since 2010. M2, the broadest measure of money supply, increased 13.2 percent from a year earlier last month, according to the central bank. That matched the median economist estimate and compared with 13.6 percent in December.

Record new credit will help the economy to maintain momentum while underscoring challenges for officials trying to limit the risk of financial turbulence from defaults and bad loans.

Xi’an Aero-Engine surged 10 percent to a record 25.93 yuan. Jiangxi Hongdu Aviation Industry Co. (600316) soared 3.7 percent to 19.40 yuan. Wuhan Guide Infrared Co. climbed 8.9 percent to 25.21 yuan.

Military Budget

“There’s market speculation that China is likely to raise its military spending during its annual legislative meeting amid regional instability,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. The National People’s Congress takes place next month.

A sub-index of consumer-staples stocks advanced 1.5 percent today, the most among CSI 300’s 10 industry groups. Kweichow Moutai, China’s biggest liquor maker by market value, gained 5 percent to 149.98 yuan. Wuliangye Yibin Co., the second largest, climbed 4.3 percent to 16.18 yuan.

A gauge of material producers gained 0.9 percent. Shandong Gold rose 2.5 percent to 17.81 yuan. Zijin Mining Group Co., China’s largest gold producer, added 0.8 percent to 2.43 yuan, its highest close since Dec. 10. Gold climbed 0.7 percent to $1,324.45 an ounce after jumping 4.1 percent last week, the most since August.

China Citic Bank Corp. slid 1 percent to 4.81 yuan. China Minsheng Banking Corp., the nation’s first privately owned bank, dropped 1.8 percent to 7.85 yuan. Ping An Bank Co. lost 0.9 percent to 11.97 yuan.

Listed banks’ earnings growth may slow to 4 percent in the fourth quarter, Lu Yiwen and Xu Bingyu, analysts at Shenyin & Wanguo Securities Co., said in a report today.

U.S. Trading

Chinese Internet retailers from Vipshop Holdings Ltd. to LightInTheBox Holding Co. (LITB:US) rallied in New York last week on speculation mobile online shopping is boosting sales.

Online fashion retailer Vipshop surged 11 percent, while LightInTheBox, which sells everything from $80 wedding gowns to $2 iPhone gadgets, climbed to a four-month high.

Vipshop will probably report this week that revenue surged 136 percent last year while LightInTheBox will post record sales, according to analysts’ estimates compiled by Bloomberg. Mobile-phone Internet users in China increased 19 percent last year to 500 million, according to a report by China Internet Network Information Center.

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net


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