Bloomberg News

China Stock Index Rises as Developers Jump on Policy Speculation

March 06, 2014

China’s stock index rose for the first time in three days, led by developers, amid speculation the government won’t step up property curbs anytime soon.

China Vanke Co. (000002), the nation’s biggest listed real-estate developer, climbed 8.3 percent while Poly Real Estate Group Co. rose 5.4 percent. Yanzhou Coal Mining Co. (600188) lost 2.1 percent while Prada SpA (1913), the Italian maker of handbags, sank to the lowest level since August 2012 in Hong Kong after Finance Minister Lou Jiwei said the government will impose higher taxes on luxury goods and other products that hurt the environment.

The Shanghai Composite Index (SHCOMP) gained 0.3 percent to 2,059.58 at the close. Government officials speaking at the National People’s Congress in Beijing described the housing market in most cities as stable and said it will get long-term support from urbanization, without specifying new measures to curb demand. The benchmark index dropped 1.1 percent earlier after Lou said economic growth as low as 7.2 percent would be acceptable to policy makers.

“Further real-estate tightening policy won’t be announced in the near term,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “Developers are good investment targets as earnings are expected to increase and valuations are low. The overall market is still facing downward pressure.”

The CSI 300 Index added 0.5 percent to 2,173.63, with almost as many stocks rising as that dropped. The Hang Seng China Enterprises Index (HSCEI) of mainland Chinese firms in Hong Kong increased 0.1 percent.

The Shanghai index is valued at 7.8 times 12-month projected earnings, compared with the five-year average multiple of 12.2, according to data compiled by Bloomberg. Trading volumes in the measure were 2.2 percent above the 30-day average today, according to data compiled by Bloomberg.

Housing Market

China’s housing market won’t see an “overall collapse” in the next 10 years because of demand from urbanization, Qiu Baoxing, the vice housing minister, said in Beijing today.

The Shanghai Composite’s property index surged 2.3 percent today, the most among the five industry groups. It climbed the most since Jan. 22.

Poly Real Estate, the nation’s second-biggest developer by market value, jumped to 7.01 yuan, rallying the most in six weeks to reverse early losses. Vanke, the largest, surged 8.3 percent to 7.32 yuan. The company reported a net income of 15.1 billion yuan ($2.47 billion) for 2013 after the market closed today. That trailed the average estimate of 15.4 billion yuan in a Bloomberg survey.

Growth Target

China Minsheng Banking Corp. (600016), the nation’s first privately owned bank, gained 2.8 percent to 7.75 yuan. China Life Insurance Co., the country’s biggest insurer, added 1.4 percent to 13.89 yuan.

China may start a trial of allowing some large stocks to be bought and sold on the same day, the Shanghai Securities News reported on its website, citing China Securities Regulatory Commission Chairman Xiao Gang.

Policy makers can achieve their goals with economic growth of 7.2 percent or 7.3 percent, as their key focus is employment, Finance Minister Lou said at a briefing in Beijing. Premier Li Keqiang unveiled a 7.5 percent expansion target yesterday.

Investors are trying to judge the ruling Communist Party’s tolerance for slower growth as policy makers seek to tame the country’s $21 trillion debt load and reduce pollution. China hasn’t missed a target for annual growth since 1998, during the Asian financial crisis, when Zhu Rongji was premier. That year, the economy expanded 7.8 percent, versus an 8 percent goal.

Prada retreated 1.8 percent to HK$56.05, while Yanzhou Coal declined 2.1 percent to 6.42 yuan. Lou didn’t give a timetable nor further details on plans to impose higher taxes.

China SOEs

The Bloomberg China-US Equity Index, the measure of the most-traded U.S.-listed Chinese companies, fell 0.4 percent in New York yesterday. PetroChina Co. and China Unicom (CHU:US) Hong Kong Ltd. paced losses amid concern the government’s pledge to deepen reforms will erode profits of state-owned companies.

China Unicom, the country’s second-biggest wireless carrier, slid the most in six weeks as the government said it will impose a tax on telecommunication services. SouFun Holdings Ltd. (SFUN:US), China’s biggest real-estate information website, rallied 12 percent.

“The government is focused on promoting private-sector growth to transform the economy,” Jeff Papp, a senior analyst at Oberweis Asset Management Inc., which manages $1.1 billion in assets, said in a phone interview from Lisle, Illinois. “There will be more competition. That means profit margins for state-owned companies won’t be that high.”

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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Companies Mentioned

  • CHU
    (China Unicom Hong Kong Ltd)
    • $16.47 USD
    • -0.08
    • -0.49%
  • SFUN
    (SouFun Holdings Ltd)
    • $12.0 USD
    • 1.18
    • 9.83%
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