China’s Stocks Rise to Two-Month High After Coal, Shipping Shares Advance
Feb. 6 (Bloomberg) -- Ting Lu, a Hong Kong-based economist with Bank of America Corp., talks about China's economy and central bank monetary policy. Lu speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Feb. 6 (Bloomberg) -- Michael Kurtz, chief Asian equity strategist at Nomura Holdings Inc., talks about the outlook for China's stocks, central bank monetary policy, and his investment strategy for the region. Kurtz speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
China’s stocks climbed, driving the benchmark index to the highest level in two months, as improving U.S. jobs data bolstered the outlook for Chinese exports and on speculation reports this week will show inflation is easing.
China Shenhua Energy Co. (601088) and Yanzhou Coal Mining Co. (600188) paced gains for coal producers after Sanford C. Bernstein & Co. said prices of the fuel may rebound. China Cosco Holdings Co., the nation’s biggest shipping line, rose 0.8 percent after U.S. employers added the most jobs in nine months in January. Changchun Gas Co. surged 9.9 percent, leading a rally for gas producers, as the prospects for rapid demand growth and the outlook on prices attracted investors.
The Shanghai Composite Index (SHCOMP) rose for a third day, adding 0.3 percent to 2,338.28 at 1:07 p.m. local time, set for the highest close since Dec. 2. The CSI 300 Index advanced 0.4 percent to 2,516.73. The Bloomberg China-US 55 Index of the most-traded Chinese shares in the U.S. advanced 2.3 percent to 106.48 on Feb. 3.
“Investors still remain cautiously optimistic about the stock market,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “A better- than-expected U.S. jobless rate and recent economic data have shown the worst is over, but the fact is, this doesn’t mean our economy has fully recovered. This is keeping any gains in the market limited.”
The Shanghai Composite has rebounded 7.3 percent this year, after plunging 33 percent in the previous two years, on speculation slowing economic growth will push the central bank to relax monetary policies and the government will take measures to support stocks. The measure trades at 10.1 times estimated earnings, near the record low of 8.9 times reached on Jan. 6, according to weekly data compiled by Bloomberg.
China, U.S. Economies
Chinese stocks may post 25 percent gains this year, spurred by the prospects of looser monetary policy, Michael Kurtz, Nomura Holdings Inc.’s chief Asian equity strategist, said in an interview on Bloomberg Television from Hong Kong.
The Shanghai index rose for a third week last week after Chinese manufacturing data exceeded economists estimates and investors speculated the central bank may lower lenders’ reserve-ratio requirements to spur loans to small companies.
China Cosco advanced 0.8 percent to 5.35 yuan. Cosco Shipping Co. climbed 1.6 percent to 4.46 yuan. In the U.S., employers added 243,000 jobs in January and the unemployment rate dropped to 8.3 percent from 8.5 percent in December, the Labor Department reported last week in Washington. The improvement exceeded the most optimistic forecasts in a Bloomberg News survey of economists.
Inflation Report
Economic reports this week may show inflation and export growth are slowing. China may say on Feb. 9 consumer prices grew 4 percent in January, compared with a 4.1 percent rise in December, according to economists’ estimates compiled by Bloomberg. January exports may drop 1.5 percent from year-ago levels, compared with a 13.4 percent gain the previous month, according to Bloomberg estimates. The trade data is scheduled for Feb. 10.
China should maintain “stable” trade policies as the global financial crisis continues to spread, Premier Wen Jiabao said, according to a report published on the website of the central government.
The nation’s economic expansion would be cut almost in half if Europe’s debt crisis worsens, a scenario hat would warrant “significant” fiscal stimulus from the nation’s government, the International Monetary Fund said today.
Policy Outlook
Based on the IMF’s “downside” forecast for the global economy, China’s growth could drop by as much as 4 percentage points from the fund’s current projection, which is for 8.2 percent this year, the organization said in a report released by its China office in Beijing.
The economy can avoid a so-called hard landing in 2012 even as growth decelerates further and hits a “soft patch” in the first quarter, Citigroup said in a report dated yesterday. With inflation contained, policy easing would help create a mild rebound in the second half, according to Citigroup.
Ting Lu, China economist at Bank of America Corp., predicts inflation may slow to 3 percent and 3.5 percent in February. The central bank may cut lenders’ reserve-requirement ratios once in the first quarter and three times in total this year, Lu said on Bloomberg Television from Hong Kong today. The People’s Bank of China announced on Nov. 30 it would lower reserve ratios by 0.5 percentage point from a record high of 21 percent, the first such cut since 2008, as inflation cooled.
Coal Producers
China Shenhua, the nation’s biggest coal producer, advanced 1.6 percent to 27.79 yuan, set for the highest close since Nov. 15. Yanzhou Coal added 1.3 percent to 24.47 yuan. Coal prices in China, after falling 10 percent since November, may recover as the weather turns warmer and the economy gains ground, Sanford C. Bernstein said.
China’s benchmark thermal-coal stabilized after three months of decline as transportation bottleneck are expected to support prices. Coal with an energy value of 5,500 kilocalories per kilogram was unchanged in the range of 775 yuan to 785 yuan a metric ton as of yesterday, according to data today from the China Coal Transport and Distribution Association.
Changchun Gas jumped 9.9 percent to 7.66 yuan. Shenzhen Gas Corp. rose 2.3 percent to 11.07 yuan, while Shaan Xi Provincial Natural Gas Co. rallied 4.3 percent to 16.23 yuan in Shenzhen.
“The gas sector is very promising,” Qiushi Qi, an analyst at China Minzu Securities Co., said by telephone from Beijing. “We estimate the nation’s gas demand to rise above 10 percent annually in at least the next five years.”
-- Editors: Allen Wan, Darren Boey
To contact Bloomberg News staff for this story: Weiyi Lim in Singapore at wlim26@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
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