China’s stocks advanced, paring a weekly loss, as property developers rebounded on speculation policymakers will continue to support the industry and economic growth may be sufficient to sustain prices.
China Vanke Co. rose 1.3 percent after Radio Television Hong Kong cited the developer as saying it won’t cut home prices nationwide this month. UFIDA Software Co. paced gains for technology stocks for a second day, the biggest advance among industry groups on the CSI 300 Index. Jiangxi Copper Co. led declines for mining stocks, limiting the market’s gains, after the world’s two largest copper producers warned of lower demand for the metal because of China’s plans to curb its economy.
“Signs that Chinese growth is coming off the boil are causing concern but note this is exactly what the Chinese authorities are looking for,” said Shane Oliver, head of investment strategy at AMP Capital Investors, which manages $90 billion in assets. “It’s likely that China will soon be able to ease up on its tightening measures.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, added 0.94, or less than 0.1 percent, to 2,553.59 at the close. About two stocks rose for each one that fell on the measure. The CSI 300 Index added 0.3 percent to 2,744.39.
The Shanghai index has lost 3.8 percent this week, adding to a 22 percent decline for the year, on concern growth will slow as the housing market cools and Europe’s debt crisis threatens China’s exports. Equities also fell this week on concern that a property tax will be imposed after record growth in prices in April and as manufacturing expansion slowed in May.
Vanke, the nation’s biggest listed property developer, rose 1.3 percent to 7.28 yuan. Poly Real Estate Group Co., the second-largest, gained 1.8 percent to 10.91 yuan. Gemdale Corp., the fourth-largest, advanced 2.2 percent to 6.59 yuan.
It’s not yet time for China to discuss reducing or stopping policy support for the nation’s real estate industry, the Securities Times reported, citing Li Fuan, head of the China Banking Regulatory Commission’s department of banking innovation.
The real estate industry will continue to be an important pillar of China’s economy in the next 20 to 30 years, it said. Banks should pick “good developers” and continue to provide them with financing, Li was cited as saying.
China’s economy will expand between 9 percent and 10 percent in 2010 after an “overheated” first quarter, World Bank chief economist Justin Lin said.
“Growth in the first quarter is a bit overheated so it would be good that the growth slows a little,” Lin said today in an interview during an economic conference in Busan, South Korea. “There is no problem” for China to maintain “9 percent to 10 percent growth,” he said.
RBC Capital Markets said interest-rate increases may be delayed if upcoming data shows more slowing in the economy. Still, China needs to tighten policy further to reduce overheating risks and contain inflation, it said in a note.
UFIDA Software added 2.7 percent to 21.87 yuan, extending a gain of 6.4 percent yesterday. China National Software & Service Co. jumped by the 10 percent daily limit for a second day, rising to 21.37 yuan. The technology index in the CSI 300 advanced 1.9 percent, the most among the 10 industry groups.
The government will seek to promote electronic commerce, education, networking services and other software applications, Li Yizhong, the head of the Ministry of Industry and Information Technology said in a speech posted on its website yesterday.
The copper market will be “volatile” for as much as another year after China took measures to cool its property market, Codelco Chief Executive Officer Diego Hernandez said yesterday in an interview. The Asian nation is a “risk to the world’s market place in the near term,” Freeport-McMoran Copper & Gold Inc. CEO Richard Adkerson said in an interview.
Jiangxi Copper, China’s biggest producer of the metal, retreated 0.4 percent to 28.40 yuan. Tongling Nonferrous Metals Group Co., the second largest, lost 1.6 percent to 16.43 yuan. Baoshan Steel, the listed unit of the second-biggest steelmaker, slid 1.1 percent to 6.21 yuan. Copper prices lost 3.1 percent in New York yesterday.
Chinese policy makers are trimming stimulus measures this year after a $1.4 trillion lending binge revived growth in 2009 Officials are targeting a 22 percent reduction in new loans and have sold bills and raised banks’ reserve requirements to suck money out of the financial system.
“A faster-than-expected labor cost increase has now become a political imperative,” the analysts wrote. They estimate that a 10 percent gain in wages in labor-intensive sectors will push up consumer-price inflation by 0.4 percent and reduce employment by 700,000 jobs.
Foreign companies that have operations in China such as Hon Hai Precision Industry Co. will boost wages by 30 percent after a series of suicides while Honda Motor Co. resumed production after most of a Chinese parts factory’s workers accepted a higher pay offer.
China’s CSI 300 may find “strong fundamental support” at around 2,500 as stock valuations price in a “harsh earnings growth” scenario, Goldman Sachs Group Inc. said.
The probability of the scenario, which involves earnings- per-share growth for A shares declining to the “low teens” this year and to a low single digit in 2011, is “low,” analysts Kinger Lau and Timothy Moe wrote in a report today.
The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.
Industrial Bank Co. (601166 CH), backed by a HSBC Holdings Plc unit, dropped 1.6 percent to 24.15 yuan after saying 992.45 million shares will become tradable on June 8 after a rights offer June 2.
Jiangnan Heavy Industry Co. (600072 CH) surged 6.7 percent to 13.42 yuan, the most in almost nine months, after saying it will distribute one bonus share for every 10 shares held.