China Stocks Gain, Extending Weekly Rally, on Easing Loan Curbs Prospect

China’s stocks rose, extending the benchmark index’s biggest weekly gain this year, as developers and banks advanced on speculation the government will relax curbs on mortgage lending after property price gains slowed.

Poly Real Estate Group Co. climbed 3.7 percent and Industrial & Commercial Bank of China Ltd. added 2.6 percent as the Southern Metropolis Daily said policy makers may loosen limitations on third-home loans. Jiangxi Copper Co. paced gains by commodity producers after the nation’s exports surged to a record last month. China Life Insurance Co. and China Pacific Insurance (Group) Co. tumbled more than 4 percent on a regulator plan to remove a cap on interest rates on some products.

“Most of the data point towards a slowdown in economic growth, which is fuelling expectations that the government will ease tightening measures,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, advanced 19.80, or 0.8 percent, to close at 2,490.72, the highest since June 28. The CSI 300 Index added 1.1 percent to 2,676.22.

The Shanghai Composite climbed 3.7 percent last week, the most this year, on speculation the government will adopt a looser monetary policy. The gauge has slumped 24 percent in 2010 on concern government efforts to curb inflation and property speculation will slow the economy. Adding to losses were plans by the nation’s biggest banks to raise as much as $54.5 billion to replenish capital after extending record loans last year.

Developers, Banks

Poly Real Estate, China’s second-largest developer by market value, climbed 3.7 percent to 11.84 yuan. China Vanke Co., the biggest, gained 5.5 percent to 7.64 yuan, the most since May 18. ICBC, the nation’s largest listed lender, added 2.6 percent to 4.30 yuan.

China’s property prices snapped 15 months of gains and bank lending eased in June. Real-estate prices in 70 cities fell 0.1 percent from the previous month, the statistics bureau said in Beijing today. New lending of 603 billion yuan ($89 billion) was the least in three months, the central bank said in a report yesterday.

China may loosen limitations on third-home loans as the curbs reaped their intended effects on the real estate market, the Southern Metropolis Daily reported, citing Qin Hong, a researcher from Ministry of Housing and Urban-Rural Development.

Looser Standards

Some Chinese banks have eased standards for mortgage lending, at least on a case-by-case basis, according to Credit Suisse Group AG in a report today. The brokerage cited its interviews over the weekend with more than 10 property agents and bank representatives.

Jiangxi Copper, China’s biggest producer of the metal, added 1.2 percent to 25.30 yuan, a fifth day of gains. Yanzhou Coal Mining Co., the listed unit of the fourth-biggest coal miner, rose 1.3 percent to 17.15 yuan. Pingdingshan Tianan Coal Mining Co., the listed unit of China’s fifth-largest producer of the coal, advanced 4.2 percent to 14.35 yuan.

Overseas sales gained 43.9 percent last month from a year ago to $137.4 billion, the General Administration of Customs said July 10. That compared with the median 38 percent forecast in a Bloomberg News survey of 24 economists. The trade surplus more than doubled to $20 billion, the highest level in eight months, according to the customs.

A rebound in China’s overseas shipments last month will provide “slight support for market sentiment in the very short term,” according to Jun Ma, chief China economist at Deutsche Bank AG, in a note to clients.

Insurers Slump

China Life, the nation’s biggest insurer, slid 4.5 percent to 23.55 yuan. China Pacific Insurance, the nation’s third- largest insurer, retreated 5.8 percent to 21.65 yuan.

China Insurance Regulatory Commission said July 9 it plans to allow insurers to decide the preset interest rates, which insurers use to estimate future investment yields when pricing contracts, on “conventional” life insurance policies. The higher the interest rate is, the cheaper the insurance policies are for customers.

The proposal to remove a cap on interest rates for some life insurance contracts will narrow the profit margin of insurers, according to Shenyin & Wanguo Securities Co. China Life and China Pacific are the companies with the biggest exposure to such policies, according to Shenyin analyst Robert Hu in a report today.

The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.

Founder Technology Group Corp. (600601 CH) rose 3.6 percent to 4.19 yuan after the company said it raised 1.03 billion yuan in a rights offer. The company sold 468 million shares at 2.20 yuan each in the rights offer, it said.

Joincare Pharmaceutical Group Industry Co. (600380 CH) added 1.5 percent to 8.02 yuan after saying its first-half net income may have surged 77.8 percent from a year earlier.

Zhejiang Huafeng Spandex Co. (002064 CH) climbed 3.1 percent to 9.42 yuan after the company said first-half net income rose to 178.4 million yuan from 8.48 million yuan, a 21- fold increase.

--Zhang Shidong. Editors: Richard Frost, Reinie Booysen

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-7014 or szhang5@bloomberg.net

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