Huaneng Lifts Stocks in U.S. From Two-Month Low: China Overnight

Chinese stocks trading in the U.S. rose from a two-month low, led by gains in Huaneng Power International Inc. (902) and China Eastern Airlines Ltd., (CEA) on speculation policy makers may take steps to spur growth.

The Bloomberg China-US 55 Index of the most-traded Chinese stocks rose 0.8 percent to 94.19, from 93.46 on Dec. 15, the lowest closing level since Oct. 7. Huaneng, China’s largest power group, gained 4.7 percent to $21.02, trading at a 35-cent discount to equivalent shares listed in Hong Kong. Sina Corp (SINA), owner of the Twitter-like Weibo service in China, advanced 4.3 percent after earlier falling as much as 11 percent on a move by Beijing’s municipal government to tighten regulation on microblog users.

Speculation is growing that policy makers may cut the lenders’ reserve requirement ratio for a second time since November after the money supply grew in November the least in a decade and the manufacturing industry contracted in December. Fitch Ratings put credit ratings for European nations, including France, Spain and Italy, under review for a downgrade, underscoring the needs for China to revive domestic demand as the European debt crisis hurts exports.

“They are probably slowing down a bit too much perhaps for their own taste, so they are easing the monetary policy,” said Angel Gurria, secretary general of the Organization for Economic Cooperation and Development, in an interview on Bloomberg Television. “External demand around the world is dropping. Therefore, China is going to have to do more of domestic demand push.”

Domestic Shares

The Shanghai Composite Index of domestic shares gained 2 percent, rebounding from the lowest close since March 2009. The Hang Seng China Enterprises Index (HSCEI), which tracks Chinese companies trading in Hong Kong, rose for the first time in seven days, gaining 1.9 percent. The Standard & Poor’s 500 Index of U.S. shares climbed 0.3 percent, while the IShares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., advanced 1.3 percent to $34.53.

21Vianet Group Inc., (VNET) an Internet data center services provider, jumped 9.7 percent to $9.58. The company said that it has exercised its option to acquire the remaining 49 percent equity interest in two companies that provide managed network services.

Huaneng’s advance extended the gain this week to 5.4 percent. China may introduce more measures to relieve power shortages in the country following a recent power price increase, Han Wenke, director general at the Energy Research Institute of the National Development and Reform Commission, said after a forum in Beijing on Dec. 14.

Sina, China’s biggest Internet portal, said Beijing’s municipal government will force microblog users to verify their identities.

Internet Rules

The new rules, effective today, ban users from setting up accounts with aliases and sending public messages containing state secrets or information that could harm national security. Sina is “evaluating the impact” the changes may have on the Weibo operation, the company said in a statement.

Chinese officials have pressured microblog services to strengthen supervision after a fatal rail crash in July sparked an outburst of criticism of the government on the Internet. Microblogs, which are used to publish short messages on the Internet, have at least 300 million registered users in China. Sina’s Weibo accounted for 66 percent of the market in August, according to a Sept. 15 report by BOCOM International.

The news isn’t the “worst case scenario” for Sina as investors had already anticipated the tightening of government regulations, according to Adam Krejcik, an analyst at Roth Capital Partners.

“Following months of speculation we believe Sina’s management is relatively prepared and also believe the actual reporting of this news, versus numerous rumors, is better for the market,” Krejcik wrote in a note to clients. “We do not believe this signals the end of Weibo in China.”

Tencent, Sohu

Tencent Holdings Ltd. (700), based in Shenzhen, is the second-biggest operator of microblogs with a 25 percent share, according to BOCOM International. Beijing-based Sohu.com Inc. (SOHU), owner of the country’s fifth-most visited website, also offers similar services. Tencent rose 0.9 percent to $19.33 in New York, while Sohu added 3.9 percent to $48.18.

Spreadtrum Communications Inc. rose 3.7 percent after the semiconductor company said it will buy back up to $50 million in shares.

Youku.com Inc., (YOKU) China’s biggest online-video website, gained 5.1 percent to $18.05. The company filed a copyright infringement lawsuit against rival Tudou Holdings Ltd. at the People’s Court in Shanghai, Youku said in an e-mailed statement. Tudou declined 1.2 percent to $11.12.

Economic Outlook

China’s domestic bourse has lost 21 percent this year, following a 14 percent decline in 2010, as policy makers raised borrowing costs to combat inflation and took measures to curb housing prices. The Shanghai Composite Index (SHCOMP) is trading at 10.7 times forecast earnings in the next 12 months, compared with 13.4 in India, 4.8 in Russia and 10 in Brazil.

Reports this week show that the economic slowdown in the world’s second-biggest economy is gathering momentum. Foreign direct investment dropped for the first time since 2009. The Conference Board’s leading index for China, which captures prospects over the next six months, fell in October.

The central bank reduced the reserve requirement ratio for lenders on Nov. 30 for the first time since 2008 to temper the pace of the economic slowdown. The central bank will lower lenders’ reserve-requirement ratios once more this year and five times in 2012, Li Wei and Stephen Green, economists at Standard Chartered Plc., wrote in a note to clients this week.

In a sign that credit restrictions are loosening, the Securities Times reported yesterday that banks in Shenzhen are joining peers in Beijing and Shanghai in offering mortgage rates for first-time home buyers.

The Chinese yuan gained 0.4 percent to 6.3484 per dollar in Shanghai, according to the China Foreign Exchange Trade System.

To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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