China’s Stocks Rise Most in 2 Weeks on Policy, Economic Outlook

Chinese stocks rose the most in two weeks as the China Securities Journal said the central bank may ease monetary policy, Greece pledged to speed up austerity measures and U.S. service industries unexpectedly expanded.

Industrial & Commercial Bank of China (601398) Ltd. and China Vanke Co. led gains by financial companies after the newspaper said policy easing may happen over the next several months. SAIC Motor Corp., the nation’s biggest listed automaker, advanced 3.6 percent after sales increased. Baoshan Iron & Steel Co. jumped the most in two weeks after the same newspaper said the government will support parts of the steel industry.

“The speculation on easing monetary policy is prevailing in the market and caused the stock rebound,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “That may get support from the inflation data later this week.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, gained 1.8 percent to 2,516.09 at the 3 p.m. close, the most since Aug. 25. The index had retreated 3.8 percent in the past four days. The CSI 300 Index (SHSZ300) climbed 2.1 percent to 2,779.09. Trading volumes in the Shanghai Composite fell to 4.9 billion yesterday, the lowest since July 5, 2010, according to data compiled by Bloomberg.

The Shanghai gauge has slumped 10 percent this year as the central bank raised interest rates five times and ordered lenders to set aside more cash as deposit reserves 12 times since the start of 2010 to contain inflation. It is valued at 11.6 times estimated earnings after valuation fell to a record low yesterday, according to daily data compiled by Bloomberg.

Monetary Policy

ICBC, the world’s largest bank by market value, added 1.2 percent to 4.12 yuan. China Construction Bank Corp. (939) advanced 0.9 percent to 4.54 yuan. China Vanke, the nation’s biggest developer by market value, climbed 1.5 percent to 8.12 yuan.

China’s central bank may add cash to the market by buying bills from banks in open market operations or cutting the required reserve ratio for banks, the China Securities Journal, which is operated by the official Xinhua News Agency, said in a commentary. Inflation may drop, reducing the need for reserve- ratio increases, the newspaper said.

China will release inflation data for August on Sept. 9. Consumer-price gains may have slowed to 6.2 percent last month from a three-year high of 6.5 percent in July, according to the median estimate of 26 economists surveyed by Bloomberg News.

China will shift to a “neutral” monetary policy from tightening if inflation starts to peak, Jing Ulrich, Hong Kong- based chairman of global markets for China at JPMorgan Chase & Co (JPM), said at a press conference in Hong Kong yesterday.

Global Economy

Jiangxi Copper Co., China’s biggest producer of the metal, climbed 2.6 percent to 32 yuan. Yunnan Copper Industry Co. (000878) added 2.5 percent to 19.25 yuan. PetroChina Co., the nation’s largest oil producer, advanced 0.9 percent to 9.79 yuan.

Three-month copper climbed 1.2 percent to $9,039 a metric ton on the London Metal Exchange as of 2:53 p.m. Singapore time. Crude for October delivery rose as much as $1.07 to $87.09 a barrel in electronic trading on the New York Mercantile Exchange.

In the U.S., service industries unexpectedly expanded at a faster pace in August, easing concern the biggest part of the nation’s economy was slumping. The Institute for Supply Management’s index of non-manufacturing businesses increased to 53.3 last month from 52.7 in July. Economists forecast the gauge would drop to 51, according to the median estimate in a Bloomberg News survey. A reading above 50 signals expansion.

U.S. Jobs

President Barack Obama plans to propose boosting job growth by injecting more than $300 billion into the economy next year mostly through tax cuts, infrastructure spending and direct aid to state and local governments. Obama is set to lay out his plans in a Sept. 8 address to Congress.

Greece said it will accelerate austerity measures pledged in return for international financing as pressure mounted from European partners before the payment of a sixth tranche of bailout loans.

Baoshan Steel gained 2.2 percent to 5.23 yuan, the most since Aug. 25. Angang Steel Co. added 2 percent to 5.50 yuan.

China will use taxes and subsidies to support the alloy steel and stainless steel industries over five years through 2015, the China Securities Journal reported, citing an unidentified person. The government and companies may spend several hundred billions of yuan on research and development, the report said.

SAIC Motor jumped 3.6 percent to 15.28 yuan, the most since Aug. 25. The company’s vehicle sales volume rose to 327,924 units in August from 286,502 a year earlier, according to a statement to the Shanghai Stock Exchange yesterday.

Chinese stocks volatility jumped by the most in almost three years last month amid concerns about the effects of Standard & Poor’s downgrade of America’s debt rating on the global economy, according to Baochuan Capital Management LLC. The AlphaShares Chinese Volatility Index, which tracks the implied volatility of options on the FTSE/Xinhua China 25 Index and the Hang Seng Index, climbed 28 percent in August.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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