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Chalco Rises to Premium as Growth Boosts Index: Overnight

Chinese stocks listed in the U.S. climbed the most in three weeks, buoyed by Aluminum Corp. of China Ltd., on speculation data due next week will show that the world’s second-largest economy has bottomed.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. added 1.2 percent to 103.08, the largest jump since March 13. The gauge was little changed on the week. Aluminum Corp., the nation’s largest producer of the metal, rose 3 percent to trade at a premium over its Hong Kong stock for the first time in three days, after saying it will boost output of rare earth metals.

China’s economy grew 8.4 percent in the first quarter, National Development and Reform Commission Vice Chairman Zhang Xiaoqiang said on April 3, faster than the 8.3 percent median of 28 economists’ estimates. New bank loans in March rose the most in 14 months, a report due next week will show, according to the median of 28 analysts. China more than doubled the amount foreigners can invest in local capital markets on April 3.

“People’s worries about a hard landing in China sound too pessimistic, and we don’t see a notable slowdown in the economy,” Qinwei Wang, a London-based economist at Capital Economics Ltd. who focuses on China’s economy and stock markets, said by phone. “The increase in foreigner’s investment quotas will help boost investors’ confidence in Chinese stocks.”

The IShares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., rose 1 percent to $37.00 yesterday, after falling the most in two weeks on April 4. The Standard & Poor’s 500 Index fell 0.1 percent to 1,398.08, after earlier losing as much 0.4 percent.

U.S. stock exchanges are closed today in observance of the Good Friday holiday.

Chalco Jumps

American depositary receipts of Aluminum Corp., known as Chalco, surged to $12.03 in the U.S., the largest one-day gain since March 13. The ADRs rose 0.8 percent on the week and traded 0.5 percent above the company’s Hong Kong stock, which slipped 0.3 percent to HK$3.70, the equivalent of 48 U.S. cents per share. The premium in the ADRs, each representing 25 common shares in the company, followed discounts of as much as 3.2 percent in the past two days.

Chalco’s parent Aluminum Corp. of China, known as Chinalco, plans to invest 5.2 billion yuan ($824 million) to increase production capacity of rare earth metals in the southern province of Guangxi, the parent company’s spokesman Yuan Li said yesterday by phone, confirming a report by China’s 21st Century Business Herald.

More Rare Earths

Chinese limits on the production and sale of rare earths have pushed up prices for the 17 chemically similar metallic elements used in Boeing Co. helicopter blades and Toyota Motor Corp. hybrid cars. Aluminum Corp. will have capacity to produce 34,700 metric tons of rare earths a year, after it took over five rare-earth companies in the eastern province of Jiangsu, the company said in June.

Beijing-based Chalco advanced 3.7 percent yesterday in Shanghai to 6.81 yuan, or $1.08 per share.

The Chinese economy expanded 8.9 percent in the last three months of 2011, the slowest pace for 10 quarters. The government last month lowered this year’s economic growth target to 7.5 percent, after keeping the goal at 8 percent over the past seven years. First-quarter gross domestic product data is scheduled to be released on April 13.

“The economy is growing a little below trend, but not as bad as the market has been thinking,” Michael Buchanan, chief Asia-Pacific economist at Goldman Sachs Group Inc. in Hong Kong, said in an interview with Bloomberg Television yesterday. “We are looking for macro easing and for growth to pick up.”

Dangdang Clothes

Consumer prices in March, due to be released on April 9, probably rose 3.4 percent, from 3.2 percent in February, according to the median of 33 analysts’ forecasts compiled by Bloomberg.

E-Commerce China Dangdang Inc. (DANG), China’s largest online book seller, jumped 5.5 percent to $9.73 yesterday in New York, the highest level since Aug. 15. The ADR rose 20 percent for the week.

The company known as Dangdang has started to offer clothing using its own brand on its online store, China National Radio reported yesterday, without saying where it got the information.

Youku Inc. (YOKU), China’s biggest online video website, rose for the first time in three days after saying it received a license to offer government-authorized content on computers, tablets and smartphones.

China’s General Administration of Press and Publication granted Youku the license on March 28, the Beijing-based company said in a statement distributed by PRNewswire yesterday. Youku’s ADRs climbed 0.7 percent to $22.2 after losing 3.8 percent in the previous two days.

Airlines Rise

China’s airlines gained after a report that domestic airlines raised passenger fuel surcharges to their highest level since 2000 to offset higher oil costs.

China Southern Airlines Co. (ZNH), Asia’s biggest airline by passenger numbers, advanced for the first day in four, adding 2 percent to $23. China Eastern Airlines Corp. (CEA), the nation’s second-largest carrier by passenger numbers, climbed 3.5 percent, the most in four weeks, to $16.71.

The surcharge increased to 150 yuan ($23.76) from 140 yuan for routes within China longer than 800 kilometers (497 miles), the Shanghai Daily reported yesterday, citing domestic carriers. The surcharge on shorter routes increased to 80 yuan from 70 yuan.

The Shanghai Composite Index (SHCOMP) jumped 1.7 percent to 2,302.24 in its first trading session after a three-day holiday. During the break, China’s securities watchdog announced a plan on April 3 to increase the quotas for foreign institutions to invest in equities, bonds and bank deposits to $80 billion, from $30 billion.

QFII Program

Offshore investors will also be allowed to pump an extra 50 billion yuan ($7.95 billion) of local currency into the country’s capital markets under a so-called Renminbi QFII program, up from 20 billion yuan, the China Securities Regulatory Commission said on the same day.

The increased Renminbi QFII quotas will mainly be used for investments in China’s domestic A-share market, without the previous restriction that no more than 20 percent of the approved amount should be used to buy stocks and stock funds, the official China Securities Journal reported yesterday, citing an unidentified official with the regulator.

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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