Chalco Premium Swells as U.S. Rates Boost Index: China Overnight

Chinese stocks in the U.S. rose, pushing Aluminum Corp of China to its biggest premium versus Hong Kong shares in two months, as Federal Reserve plans to leave interest rates low for longer boosted global growth optimism and speculation mounted that China will take further steps to bolster its economy.

The Bloomberg China-US 55 Index (CH55BN) of the most-traded Chinese stocks in the U.S. gained 1.2 percent to 102.76 in New York yesterday, led by energy and commodity producers. Sinopec Shanghai Petrochemical Co. (SHI) and Yanzhou Coal Mining Co. (YZC) rose as oil and metals prices climbed. Aluminum Corp., known as Chalco, advanced to a two-month high, extending a 5 percent premium over stock traded in Hong Kong as markets there open after the three- day Lunar New Year holiday.

Economic growth in China eased to the slowest pace since 2009 in the fourth quarter, stoking speculation that policy makers will further loosen lending and monetary policy. The Federal Reserve will keep U.S. benchmark rates “exceptionally low” until at least late 2014, officials said in a statement yesterday.

The Fed’s statement indicated “it is going to be easing for quite some time, and the market turned around,” said Greg Lesko, who oversees $750 million as managing director at Deltec Asset Management in New York by phone yesterday. China may “prefer some fiscal programs to monetary easing. They still have the ability to spend money.”

The People’s Bank of China, which lowered banks’ reserve- requirement ratios for the first time since 2008 last month, hasn’t changed the nation’s benchmark 6.56 percent lending rate since July. The Chinese government rolled out a $586 billion stimulus package that helped to lift the economy out of the 2008 global financial crisis.

Metals Bets

Chalco rose 2.1 percent to $13.51 in New York, extending its advance this week to 4.5 percent. The difference between the company’s U.S. and Hong Kong stocks was the widest since Nov. 30, data compiled by Bloomberg show. Aluminum for three-month delivery advanced for the third day, gaining 0.6 percent to settle at $2,252 a ton on the London Metal Exchange, the highest closing level since Oct. 27.

Speculators raised bets on higher metal prices by the most since July on signs of growth in the U.S., increasing demand in China and more confidence in Europe.

Money managers increased combined net-long positions in five industrial and precious metals by 13 percent to 152,665 futures and options in the week ended Jan. 17, Commodity Futures Trading Commission data show. The Standard & Poor’s GSCI Spot Index of 24 commodities has risen 2.6 percent this month, led by silver, zinc and aluminum.

‘Double-Digit’ Rally

The Standard & Poor’s 500 (SPX) Index advanced 0.9 percent to a six-month high of 1,326.06. Mainland Chinese markets are closed all of this week for the New Year break.

“I do expect the Hong Kong market after the New Year holiday to take us back very quickly to July levels last year,” Thomas Murphy, a managing partner at Family Office Research & Management Ltd. in Sydney, a private wealth-management firm, said in a Bloomberg Television interview yesterday. “The Chinese market will actually lead the rest of the emerging markets in terms of upward moves.”

Hong Kong’s Hang Seng Index (HSI) has slumped 12 percent from a 22,770.5 level reached on July 4, the highest over the past six months. The market will post a “double-digit rally” this year, with most gains to come in the second half, Murphy said.

American depositary receipts of Yanzhou Coal, the fourth- largest coal producer in the country, climbed 2.9 percent to a two-month high of $25.31. The ADRs are trading at a 4 percent premium over the company’s Hong Kong stock, which gained 0.6 percent to HK$18.88 on Jan. 20, or the equivalent of $2.43 a share. Each ADR represents 10 ordinary shares.

Sinopec Shanghai

Sinopec Shanghai, a unit of China’s largest oil refiner, rose 2.3 percent to $37.62. Its parent China Petroleum and Chemical Corp., known as Sinopec, climbed 1.2 percent to one- week high of $118.23.

The iShares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., rose 1.1 percent to $39.41 in its seventh straight day of gains. The yuan weakened 0.4 percent to 6.3390 versus the dollar on Jan. 20, according to the China Foreign Exchange Trade System.

Suntech Power Holdings Ltd. (STP), the world’s largest photovoltaic panel marker, climbed 2.6 percent, the most in a week, to $3.14 after Chief Executive Officer Zhengrong Shi said the solar development market is moving away from Europe to expand rapidly in China, the U.S., India, Japan and South Africa.

Solar Cost

The cost of generating electricity from the sun will compete with conventional power delivered on a grid in half the world by 2015, Shi told Bloomberg Television yesterday in an interview in Davos. Installations in China may reach 4,000 megawatts this year, he said.

China, the world’s second-largest economy, expanded 8.9 percent in the three months ended Dec. 31, from 9.1 percent in the previous quarter, the statistics bureau said on Jan. 17. Full-year growth slowed to 9.2 percent in 2011 from 10.4 percent in 2010.

Chinese manufacturing contracted in January for the second time in three months, according to the median estimate of six analysts surveyed by Bloomberg before the purchasing managers’ index release on Feb. 1.

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net

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