China Stocks Gain on Government Support, Greek Election Optimism
China’s stocks rose for the first time in four days on speculation the government will take more steps to bolster economic growth and concern eased that Greece will leave the euro bloc.
Anhui Conch Cement Co. (600585) and China Railway Erju Co. jumped more than 5 percent after Credit Suisse Group AG said the government is accelerating investment approvals. Jiangxi Copper Co. advanced among commodity producers after opinion polls showed support for a party that backed up bailout plans with the European Union. SAIC Motor Corp. (600104), China’s largest carmaker, surged the most in four months on speculation the government will subsidize purchases of fuel-efficient cars.
“Investments are the powerful tools the government can use now to boost the economy in a short term,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million. “These measures are useful to get rid of the hard-landing risk in the economy.”
The Shanghai Composite Index (SHCOMP) advanced 1.2 percent to 2,361.37 at the close, erasing a 1.1 percent loss and snapping a three-day, 1.7 percent drop. The CSI 300 Index (SHSZ300) gained 1.6 percent to 2,614.69. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 0.8 percent in New York on May 25.
The Shanghai index lost 0.5 percent last week, a third week of declines, after a survey by HSBC Holdings Plc and Markit Economics signaled manufacturing may shrink for a seventh month in May. The stock gauge has fallen 1.5 percent this month on concern the slowdown in the world’s second-largest economy is deepening. The measure trades for 10.2 times estimated profit, compared with the MSCI Emerging Markets Index’s multiple of 9.7.
Anhui Conch, China’s biggest cement maker, added 5.8 percent to 17.87 yuan. Gansu Qilianshan Cement Group Co. advanced by the daily limit of 10 percent to 13.42 yuan. Railway Erju surged 10 percent to 8.07 yuan. Hebei Iron & Steel Co. (000709), the listed unit of China’s biggest steel producer, gained 2.3 percent to 3.10 yuan.
Spending on investment will range from 1 trillion yuan ($157.7 billion) to 2 trillion yuan, compared with the 4 trillion yuan stimulus enacted in response to the global financial crisis, Dong Tao, a Hong Kong-based economist, said in a research note today.
China’s State Council said on May 23 that downside risks to growth are increasing and the government will intensify “fine- tuning” policies as needed, signaling it may take more aggressive steps to support the nation’s expansion. Industrial companies’ profits declined 2.2 percent from a year earlier in April, the National Bureau of Statistics said on its website yesterday. That compared with a 4.5 percent gain in March.
The government should speed up important infrastructure projects in impoverished areas and improve health-care services, the Xinhua News Agency reported yesterday, citing Premier Wen Jiabao during a trip to Hunan province.
“Economic figures for May will continue to be bad,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “The current stimulus measures are still perceived to be weak and not enough to reverse a decline in growth. The market is looking forward to more.”
The Shanghai Composite has advanced 7.4 percent this year on expectations the central bank will ease monetary policies to spur growth. Thirty-day volatility in the index was at 14.70 today, near the lowest level in a year. About 7.4 billion shares changed hands on the gauge on May 25, 18 percent lower than its 2012 daily average.
Commodity producers advanced on speculation Greece avoiding an exit from the euro area will ease Europe’s debt crisis and boost metals demand in Europe. The continent is China’s biggest export market, making up about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.
Jiangxi Copper, China’s biggest producer of the metal, rose 2.2 percent to 26.04 yuan. Aluminum Corp. of China Ltd., the listed unit of nation’s biggest maker of the lightweight metal, added 1.5 percent to 6.84 yuan. Greece’s New Democracy, which supports a European Union bailout plan, was placed first in all six opinion polls published on May 26 as campaigning continued for next month’s general election.
SAIC Motor jumped 5.2 percent to 15.54 yuan, its biggest gain since Jan. 17. FAW Car Co., which makes passenger cars with Volkswagen AG, gained 5.2 percent to 12.05 yuan. Chongqing Changan Automobile Co. (000625), the Chinese partner of Ford Motor Co. and Mazda Motor Corp., surged 7.2 percent to 5.38 yuan.
The government will provide subsidies to buyers who trade in used vehicles for fuel-efficient ones in rural areas, Reuters reported, citing an unidentified government official.
American depositary receipts on Suntech Power Holdings Co., the world’s biggest solar-panel maker, fell to a seven-month low on May 25 after HSBC Holdings Plc reduced its price estimate on the shares and Nomura Holdings Inc. reiterated a sell recommendation on the ADRs.
--Zhang Shidong. Editors: Darren Boey, Richard Frost
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