China’s Stocks Rise, Extend Weekly Gain, on Europe, Looser Policy Outlook

Chinese stock-index futures rose, signaling gains for the benchmark index, after Greece signaled it won’t hold a referendum on a bailout package and investors speculated China will take more measures to boost the economy.

Futures on the CSI 300 Index (SHSZ300) expiring in November, the most active contract, gained 0.8 percent to 2,776.80 as of 9:16 a.m. local time. Jiangxi Copper Co. and coal producer China Shenhua Energy Co. may rise on higher raw-material prices. China Vanke Co., the nation’s biggest listed property developer, may decline after sales fell 33 percent in October. Asian stock markets climbed as Greece moved closer to accepting a bailout and the European Central Bank unexpectedly lowered interest rates.

“The rate cut and recent progress on the Greek debt problem help local investors psychologically by increasing their appetite for risk assets,” said Zhang Ling, general manager at Shanghai River Fund Management Co. “Domestically, the period for policy over-tightening is over and that’ll help the economy get on a smooth track and is positive for stocks.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, climbed 3.98 points, or 0.2 percent, to 2,508.09 yesterday, the highest since Sept. 21. It has gained 1.4 percent this week. The CSI 300 Index rose 0.1 percent to 2,744.30.

The Shanghai Composite has rebounded 8.2 percent from this year’s low on Oct. 21, after the government announced measures to help small businesses through easier access to bank loans and said it will lower the threshold for payment on value-added and business taxes for small companies.

“Recent news flow suggests policy loosening may have already started,” Mingchun Sun, the Hong Kong-based head of China Research at Daiwa Capital Markets, said in a report dated yesterday.

‘Most Likely True’

Media reports from Hong Kong and China that some Chinese banks had their loan quotas being increased for Novemeber are “most likely true,” according to Sun. New Chinese bank loans may exceed 600 billion yuan this month and next and full-year loan growth may reach 7.5 trillion yuan, he said, cutting the probability of an economic “hard-landing” to 5 percent from 25 percent for the fourth quarter.

Chinese stocks have advanced this week as some manufacturing and non-manufacturing reports signaled a slowdown in the economy, increasing speculation the goverment will cut banks’ reserve requirement ratios or introduce more fiscal measures to bolster growth as inflation eases.

The nation’s inflation may have slowed to 5.3 percent or 5.4 percent in October, said Zhu Jianfang, a Beijing-based economist at Citic Securities Co. The figure is scheduled for release on Nov. 9. Consumer prices rose 6.1 percent in September.

Greek Bailout

The Shanghai Composite has fallen 11 percent this year after the central bank raised interest rates three times and lifted the reserve-requirement ratio to curb inflation that’s near a three-year high. It’s valued at 11.7 times estimated earnings, compared with a record low of 10.8 times on Oct. 21, according to weekly data compiled by Bloomberg.

The Bloomberg China-US 55 Index, the measure of the most- traded U.S.-listed Chinese companies, rose 0.3 percent yesterday to the highest in a week.

“We are expecting at this stage the bailout package to go through,” Lorraine Tan, director of Asia equity research at Standard & Poor’s, said in a Bloomberg Television interview from Hong Kong. “Our strategy is to stay positive in markets where there are good domestic stories, we’re talking mainly about China and Indonesia.”

Greek Finance Minister Evangelos Venizelos, speaking to party lawmakers in Parliament in Athens, said the nation won’t hold a referendum. Just hours after saying Greeks need to decide on whether their future is in the euro, Prime Minister George Papandreou said the country belongs in the currency bloc.

The European central bank unanimously lowered the benchmark interest rate by 25 basis points to 1.25 percent, confounding 51 of 55 economists in a Bloomberg News survey. ECB President Mario Draghi said the rate cut happened partly because “what we’re observing now is slow growth heading toward a mild recession.”

Europe is China’s biggest export market, accounting for more than a fifth of its overseas shipments.

--Zhang Shidong. Editors: Allen Wan, Richard Frost

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-3040 or szhang5@bloomberg.net

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

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