China's Stocks Rise After Bernanke Pledge; Commodity, Consumer Shares Gain
China’s stocks rose the most in two weeks, led by commodity and consumer companies, as Federal Reserve Chairman Ben S. Bernanke’s vow to safeguard the U.S. recovery eased concern the global economic slowdown will worsen.
Jiangxi Copper Co. and Baoshan Iron & Steel Co. led gains for commodity producers on the prospect of higher raw materials demand. China Shenhua Energy Co., the nation’s biggest coal producer, climbed the most in a week after reporting a 14 percent jump in profit that beat analyst estimates. Kweichow Moutai Co. and Tsingtao Brewery Co. advanced more than 4 percent on speculation rising consumer prices will boost their earnings.
“The pledge from the U.S. may create a favorable environment for China to engineer a soft landing for its economy,” said Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co.
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, gained 41.92, or 1.6 percent, to 2,652.66 at the 3 p.m. close, the biggest advance since Aug. 16. The CSI 300 Index added 2 percent to 2,915.01. Stocks rose across Asia as the Bank of Japan expanded credit support for banks and Bernanke pledged to safeguard the recovery.
The Shanghai gauge has rebounded 12 percent from this year’s low on July 5 as investors speculated the government would ease monetary policy. That’s pared this year’s loss to 19 percent, after the government increased down-payment requirements on home sales and ordered banks to set aside more deposits as reserves.
The Standard & Poor’s 500 Index gained 1.7 percent on Aug. 27 after Bernanke said in a speech to central bankers from around the world in Jackson Hole, Wyoming, that the U.S. central bank will do all that it can to ensure a continuation of the recovery, including “unconventional measures.” The U.S. economy grew at a 1.6 percent annual rate in the second quarter, topping the average economist estimate of 1.4 percent. The U.S. makes up about 20 percent of China’s exports.
“The U.S. will very likely introduce additional stimulus measures to prevent a double-dip for its economy,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “To some extent, that will alleviate lingering concern about a faltering global economic recovery.”
Jiangxi Copper, China’s biggest producer of the metal, gained 5.4 percent to 30.60 yuan. Zhuzhou Smelter Group Co., the largest producer of refined zinc, advanced 3.3 percent to 10.47 yuan. Western Mining Co., the fourth-largest maker of zinc concentrate, added 3.4 percent to 11.10 yuan. The London Metal Exchange Index of six metals including copper and zinc advanced 2.1 percent.
Baoshan Steel, the listed unit of China’s second-biggest steelmaker, climbed 2.4 percent to 6.47 yuan after the biggest publicly traded steelmaker posted a sevenfold increase in second-quarter profit as demand for the metal gained.
Shenhua, the nation’s biggest producer of coal, added 2.8 percent to 24.39 yuan after the company reported a 14 percent increase in first-half profit because of higher demand. The stock had the biggest gain since Aug. 19.
China’s consumer prices may reach this year’s peak of about 4 percent in September or October, China Business News reported today, citing Ba Shusong, deputy head of the financial institute of the State Council’s Development Research Center. Inflation accelerated to 3.3 percent in July, the fastest in 21 months.
A gauge of consumer staple stocks rose 4.3 percent for the biggest gain in the CSI 300 Index today. Rising prices may boost the earnings of makers of consumer goods.
Kweichow Moutai, China’s biggest producer of baijiu liquor by market value, gained 5.8 percent to 159.82 yuan. Tsingtao Brewery, China’s second-biggest brewery by volume, advanced 4.2 percent to 36.66 yuan. Bright Dairy & Food Co., the country’s second-largest listed dairy-product maker, climbed 2.8 percent to 9.21 yuan after saying first-half net income rose 35 percent.
Ningbo Yunsheng Group Co. rallied 10 percent to 18.77 yuan, leading gains for rare-earth companies, on the prospect of rising demand for the raw materials used in products ranging from cell phones to radar.
China defended its controls on exports of rare earth after Japanese officials raised concerns about supplies. Restrictions on the rare earth industry will help protect the environment, the state-run Xinhua News Agency cited Chen Deming, China’s commerce minister, as saying Aug. 28 at a media briefing during China-Japan economic talks in Beijing.
Kingray New Materials Science & Technology Co. surged the maximum 10 percent to 15.26 yuan. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. climbed 10 percent to 53.92 yuan.
The first negative fund flow into China in three months “bodes ill” for Chinese stocks in the near term, according to China International Capital Corp., referring to EPFR Global data that showed redemptions from China equity funds reached a 15- week high in the week to Aug. 25.
“A potential economic relapse and a Fed almost out of bullets are important headwinds in the coming months for Chinese markets,” Hao Hong, a Beijing-based global equity strategist at CICC, wrote in a note to clients. “Further, we note that fund flows into China have turned negative for the first time in the past 12 weeks. When fund flows turned negative sequentially for the first time on January 20 and May 5 this year, Chinese markets have subsequently underperformed.”