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Most Chinese Stocks Advance on Support Measures; Chalco Jumps

Most Chinese stocks rose as government measures to bolster equities overshadowed concern housing demand will weaken and the election of a new president in France may deepen Europe’s debt crisis.

About four stocks climbed for every three that fell on the Shanghai Composite Index (SHCOMP), which slipped 0.07 point to 2,451.95 at the close. Agreements made in U.S.-China talks last week such as a higher dividend payout ratio for listed state-owned enterprises and the opening of the securities market to more investors are positive for stocks, Citigroup Inc. said. Chinese regulators may soon introduce so-called “seed funds” to invest in the stock market, it said.

Aluminum Corp. of China Ltd. jumped 4.2 percent after its parent said the government asked it to play a leading role in the consolidation of the rare earth industry. China Vanke Co. (000002) led declines for developers after the Xinhua News Agency reported Industrial & Commercial Bank of China (601398) Ltd. suspended a discount on mortgages for first-time home buyers nationwide.

“Although the economic fundamentals remain uncertain, it’s more important to see the securities regulator talking up the market,” said Wu Kan, Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “There are strong expectations that the regulator will continue to improve the basic processes of the stock market to lure investors back.”

Thirty-day volatility in the Shanghai Composite was at 16.4 today, the lowest since March 27. The CSI 300 Index (SHSZ300) added 0.1 percent to 2,717.78. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 1.5 percent in New York on May 4.

Weekly Performance

The Shanghai index advanced 2.3 percent last week to the highest level since March 13 after the securities regulator cut trading costs and manufacturing expanded for a fifth month in April. About 10.2 billion shares changed hands on May 4, 12 percent higher than the daily average this year.

The gauge has climbed 11 percent this year on expectations the government will relax monetary policies to spur economic growth. Stocks in the gauge are valued at 10.5 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg.

Yuan-denominated A shares are trading at the highest prices against Hong Kong-listed shares of Chinese companies since Dec. 20, according to a measure tracking the price gap of the two classes of stocks.

Support Measures

Further measures by China to boost liquidity in equity market will continue to support outperformance of China-listed stocks and “cheap” blue chips in near term, Minggao Shen and Ben Wei, analysts at Citigroup, wrote in a client note dated yesterday. A shares and H shares may challenge range highs for the first time in 2012, they wrote.

The China Securities Regulatory Commission has proposed allowing asset management companies to apply for multiple funds at the same time, according to a statement posted on the regulator’s website on May 4. China allows fund companies to apply for a single fund product any one time under the current regulation, the statement said.

China will expand a trial of the over-the-counter market nationwide, Caijing reported today, citing Yao Gang, Vice Chairman of the CSRC. A threshold will be set up for individuals trading in the market, according to the report.

Chalco Jumps

Chalco, the listed unit of nation’s biggest maker of the lightweight metal, gained 4.2 percent to 7.50 yuan, its biggest advance since March 21.

Parent Aluminum Corp. of China was asked by Su Bo, vice minister of industry and information technology, to accelerate the nation’s rare earth consolidation and move toward setting up a rare earth group, according to a statement on the company’s website today.

Beiqi Foton Motor Co., China’s biggest commercial-vehicle maker, surged 8.4 percent to 8.79 yuan. SAIC Motor Corp. (600104), China’s largest carmaker, rose 0.6 percent to 16.19 yuan. FAW Car Co., which makes passenger cars in China with Volkswagen AG, gained 2.2 percent to 11.97 yuan.

Gasoline and diesel prices may drop by 300 yuan ($47.5) per ton, or 0.22-0.26 yuan a liter, the Shanghai Securities News reported today, citing Hu Huichun, an analyst at researcher Chem99.com.

Chinese central bank short-term fund injection operations have improved liquidity and reduced the need for a reserve requirement ratio cut right now, Market News International reported, citing unidentified people familiar with discussions at the People’s Bank of China and the State Administration of Foreign Exchange.

Scrapping Discounts

Vanke, the nation’s largest listed property developer, fell 1.6 percent to 9.07 yuan. China Merchants Property Development Co. (000024), the third largest by market value, slid 1.6 percent to 23.39 yuan. Gemdale Corp. (600383), the fourth biggest, lost 2.5 percent to 6.63 yuan.

ICBC, the largest lender, notified its borrowers of scrapping the mortgage rate discount by phone last week, Xinhua reported. The suspension was made amid tighter liquidity and “deposit instability,” according to Sophie Jiang, banking analyst at Religare Capital Markets.

China Construction Bank Corp., Bank of China Ltd. and Agricultural Bank of China Ltd. may follow ICBC, Religare said in a report. ICBC rose 0.9 percent to 4.42 yuan.

Europe Concern

The MSCI Asia Pacific Index slumped 2.5 percent today after Socialist Francois Hollande was elected president of France and Greek voters flocked to anti-bailout parties. Hollande’s platform calls for policies German Chancellor Angela Merkel opposes, including higher taxes, increased spending and a delayed deficit-reduction effort.

Europe is China’s biggest export market, making up about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.

A government report due May 10 may show exports grew 8.5 percent in April from a year earlier, compared with 8.9 percent in March, according to the median estimate of 28 economists surveyed by Bloomberg. China’s statistics bureau is scheduled to release a set of April economic data including inflation and industrial production on May 11.

Export orders fell 2.3 percent year-on-year to $36 billion, the first decline since 2009, the China Securities Journal reported, citing Liu Jianjun, a spokesman with the fair. Orders from European Union countries fell 5.6 percent, according to the newspaper.

U.S.-Traded Stocks

Chinese shares traded in New York slumped last week, pushing the benchmark index to its first weekly decline since March, on concern the global slowdown will curb demand for goods from the world’s biggest exporter.

Payrolls in the U.S. climbed 115,000 in April, the smallest increase in six months, Labor Department figures released during U.S. trading hours on May 4 showed. The median estimate of 85 economists surveyed by Bloomberg was for an increase of 160,000.

The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. lost 2.2 percent last week after four weeks of gains.

--Zhang Shidong. Editors: Allen Wan, Richard Frost

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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