China’s stocks rose for a fifth day as property developers climbed on speculation more local governments are challenging real-estate restrictions and lower oil prices spurred gains for automakers and shipping companies.
Gemdale Corp. (600383) led a gauge of developers to its highest level since September after the National Business Daily reported a county in Zhejiang province canceled restrictions on buying homes from this year. China Shipping Container Lines Co. (601866), the second-largest carrier of sea-cargo boxes, jumped 2.8 percent and SAIC Motor Co. climbed 1 percent after oil dropped from a nine-month high in New York. China Construction Bank Corp. (939) paced a drop for some lenders after the 21st Century Business Herald reported net deposits at the four biggest banks slumped.
“Expectations are high among investors that the government will eventually loosen its policies including curbs on the property market to preserve economic growth,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million. “The rally still has legs.”
The Shanghai Composite Index (SHCOMP) advanced 5.97 points, or 0.3 percent, to 2,409.55 at the close, the highest since Nov. 29. The five-day winning streak is the longest since Oct. 28. The CSI 300 Index added 0.3 percent to 2,606.26. The Bloomberg China-US 55 Index of the most-traded Chinese shares in the U.S. added 1 percent yesterday in New York.
The Shanghai Composite has rebounded 9.6 percent this year on expectations the government will ease monetary policies to bolster economic growth that cooled to the slowest pace in 2 1/2 years in the fourth quarter of 2011. The measure trades at 10 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg.
Premier Wen Jiabao will target an expansion of less than 8 percent in his report to the National People’s Congress in Beijing on March 5, according to 8 of 15 economists surveyed by Bloomberg News. The median estimate of 7.5 percent compares with the 8 percent goal maintained from 2005 to 2011, even amid the 2008-09 world recession.
Wen said the nation needs to start “fine-tuning” economic policies this quarter, the official Xinhua News Agency reported Feb. 12, fueling speculation that the government will soon ease policy further to preserve economic growth. The Shanghai Composite has extended gains into a sixth week, the longest winning streak since November 2010, after the government cut reserve-requirement ratios last weekend.
A gauge of property stocks in the Shanghai Composite climbed for a fifth day, adding 0.5 percent. Gemdale rose 0.4 percent to 5.67 yuan. Financial Street Holding Co. advanced 0.6 percent to 6.46 yuan.
Xiangshan county in Zhejiang canceled restrictions on buying homes starting this year, the National Business Daily reported, citing unidentified people from the local property industry association. An unidentified official from the local real estate management department denied the government move, according to the newspaper.
Shanghai’s government reiterated that its property policy hasn’t changed in a statement yesterday in response to a report by the Shanghai Securities News that the city had eased some restrictions on property purchases.
Falling home prices fueled an attempt by China’s smaller cities to release tightening on property policies. The eastern city of Wuhu was the first Chinese city this year to ease measures ordered by the central government by waiving a deed tax and subsidizing some home purchases. The move was suspended three days later, following the outcome of a similar attempt in October by Foshan in southern China.
China Shipping Container gained 2.8 percent to 2.97 yuan. Cosco Shipping Co. (600428), a unit of China’s biggest shipping company, climbed 1.3 percent to 4.80 yuan. Hainan Airlines Co. advanced 0.6 percent to 4.93 yuan.
Oil dropped as investors speculated that fuel demand may falter after a report showed crude stockpiles increased in the U.S., the world’s biggest consumer of the commodity. Crude for April delivery fell as much as 56 cents to $105.72 a barrel in electronic trading in New York today.
Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., China’s biggest producer of rare earth, rose 3.3 percent to 49.76 yuan. Xiamen Tungsten Co., which also produces rare earth, added 1 percent to 37.10 yuan.
China aims to increase the annual capacity of rare-earth magnetic material by 20,000 tons by 2015, according to a statement posted on the Ministry of Industry and Information Technology’s website yesterday.
Stocks to Drop
China’s stocks may fall as much as 13 percent by the end of the year as the central bank’s “fine-tuning” of monetary policies won’t be enough to offset an economic slowdown, according to Bank of America Corp.
The government needs to cut interest rates or relax curbs in the property market to sustain this year’s rebound for the Shanghai Composite, David Cui, chief China strategist at the Merrill Lynch unit, said in an interview in its Shanghai office yesterday. Cui, who has been bearish on China equities since May 2010, said the Shanghai gauge may drop to 2,100 by year-end.
“If the government only does fine tuning, it’s not sufficient to remove the major overhangs behind the poor market performance over the past two years or so, including a lack of a new and sustainable growth driver and the banking system’s bad debts,” said Cui. “The markets will likely remain lukewarm.”
Construction Bank, the country’s second-largest bank, dropped 0.4 percent to 4.85 yuan. Bank of China Ltd. (3988), the third biggest, lost 0.3 percent to 3.05 yuan. Agricultural Bank of China Ltd. (601288), the fourth biggest, fell 0.4 percent to 2.71 yuan.
Net deposits for the month at China’s four biggest banks fell after the first 20 days of February from the level they were at after the first 10 days, the 21st Century Business Herald reported today, citing unidentified data. Lending by the four banks was about 75 billion yuan in the first 20 days of February, according to the newspaper.
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