China Stocks Rise as Commodities Gain on Possible U.S. Stimulus
China’s stocks rose for a second day, led by commodity producers, after U.S. Federal Reserve Chairman Ben S. Bernanke said he is prepared to provide additional stimulus to boost the economy.
Zijin Mining Group Co., the nation’s biggest producer of bullion, jumped more than 5 percent as Euro Pacific Capital Inc. predicted gold may surge to $2,000 if the Fed starts a third round of U.S. debt purchases. Jiangxi Copper Co. rose to the highest since April after global commodity prices climbed to a four-week peak. Agricultural Bank of China Ltd. (601288) paced declines for banks after Market News International cited the nation’s economic planners as saying policy tightening will carry on.
“The QE3 will provide a short-term boost to the U.S. and the asset markets including stocks and commodities as the whole financial system will be flooded with cash,” said Sun Chao, an analyst at Citic Securities Co., China’s biggest brokerage. “On the domestic front, local investors still expect the government to ease policy tightening and growth to pick up again.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, added 2.05 points, or 0.1 percent, to 2,797.53 as of 10:42 a.m. local time. The CSI 300 Index (SHSZ300) rose 0.1 percent to 3,108.88, led by metal and energy stocks.
The Shanghai gauge climbed the most since July 4 yesterday after a government report showed China’s economy grew at faster- than-expected 9.5 percent in the second quarter and industrial production rose more than estimated in June. The index has slipped 0.2 percent this year on speculation growth will slow after the central bank raised interest rates five times and the reserve-requirement ratio 12 times since the start of 2010 to tame inflation that reached a three-year high last month.
Gauges of energy and material stocks advanced 2 percent and 1.9 percent respectively today, the two biggest gainers among the CSI 300’s 10 industry groups.
The Standard & Poor’s GSCI index of 24 commodities rose 1.2 percent to 698.04 yesterday, the highest close since June 14. Gold futures gained to a record yesterday in New York.
Gold prices, which rose to a record of $1,589.80 an ounce today, may surge to $2,000 if the Fed starts a third round of U.S. debt purchases, according to Michael Pento, economist at Euro Pacific. “People will be forced into buying gold.”
Zijin Mining surged 6.3 percent to 5.78 yuan. Jiangxi Copper rose 3.4 percent to 37.30 yuan. Zhuzhou Smelter Group Co., China’s biggest producer of refined zinc, advanced 4.1 percent to 18.15 yuan. China Shenhua Energy Co., the largest coal producer, gained 2.3 percent to 30.96 yuan.
Fed Chairman Bernanke told Congress the central bank is prepared to take additional action, including buying more government bonds, if the economy appears to be in danger of stalling. The Fed completed a program last month to buy $600 billion of Treasury bonds that aimed to stimulate the economy by reducing borrowing costs, boosting stock prices and spurring consumer spending. The second round of so-called quantitative easing was known as QE2 among investors.
Hunan Dakang Pasture Farming Co., a pig farmer, jumped 5.9 percent to 19.06 yuan, set for the biggest gain since June 27. Henan Chuying Agro-pastoral Co. added 2.8 percent to 34.80 yuan.
China will boost subsidies and wages for raising hogs to support the industry, according to a statement on the Chinese government website yesterday, citing a meeting chaired by Premier Wen Jiabao. The measures include offering 100 yuan subsidies for each reproductive sow, it said.
Consumer prices in June were mostly pushed up by rising food and pork costs. Inflation climbed to a three-year high of 6 percent last month, the statistics bureau said on July 9. That exceeded the previous month’s 5.5 percent and the government’s full-year target of 4 percent.
China may raise interest rates once more if inflation remains at elevated levels, Market News International reported today, citing an unidentified person close to the National Development and Reform Commission.
Tightening will continue into the second half of this year, Market News said, citing the person familiar with discussions at the top levels of the planning body. Consumer prices may rise 6.2 percent in July, Market News said, citing the person.
Chinese banks, the cheapest among major emerging markets’ lenders, may drop as overseas banks and funds trim stakes to meet capital rules and curb risk amid concerns that the nation’s record credit boom will unravel.
“You will certainly see share sales by some of these cornerstone investors,” said Sandy Mehta, chief executive officer for Hong Kong-based Value Investment Principals Ltd.
AgriBank, the nation’s fourth-largest by assets, dropped 0.7 percent to 2.69 yuan. A 12-month lockup period on 22 percent of the lender’s Hong Kong-listed shares, valued at about HK$27 billion ($3.5 billion) and held by Qatar Investment Authority, will expire July 16, the Beijing-based bank’s filings show. China Citic Bank Corp., the banking unit of the nation’s largest investment company, retreated 0.7 percent to 4.45 yuan.
The market’s gains were limited today as Moody’s Investors Service put the U.S., rated Aaa since 1917, under review for a credit-rating downgrade for the first time since 1995 on concern the government’s $14.3 trillion debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes even though the risk remains low.
--Zhang Shidong. Editors: Allen Wan, Matthew Oakley
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