Chinese stocks traded in New York posted their biggest two-day advance since April as E-Commerce China Dangdang Inc. surged, on prospects a delay by the government to tighten bank capital rules will support growth.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. climbed 2.7 percent to 90.21 at the close of trading in New York, resulting in a two-day gain of 4 percent, the most since April 12. Dangdang, owner of China’s biggest Internet bookseller, jumped the most since January while SouFun Holdings Ltd. (SFUN), owner of the country’s biggest real estate website, advanced for a third day.
Chinese regulators delayed the rules after banks warned that the change would cut lending capacity at a time the world’s second-largest economy is growing at the slowest pace in 11 quarters. European Central Bank President Mario Draghi said officials stand ready to act as the region’s growth outlook worsens while Federal Reserve Bank of Atlanta President Dennis Lockhart said extending the bank’s stimulus program, which lengthens maturities of debt on its balance sheet, is an option.
“Even though the Chinese haven’t cut rates, they’re in the process of potentially adding liquidity to the system to keep growth above that magical, mystical 7.5 percent level,” Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston, said in a phone interview. “We’re also getting more dovish talk from the Federal Reserve and the ECB which is quelling some of the angst that has been in the marketplace for the past couple of weeks.”
China ETF Jumps
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., advanced the most in a week, adding 2.7 percent to $33.49. The Standard & Poor’s 500 (SPX) Index rose 2.3 percent to 1,315.13 as Home Depot Inc. (HD), the largest U.S. home-improvement retailer, climbed 3.4 percent after raising its stock repurchase plan by $500 million for fiscal 2012. The Dow Jones Industrial Average (INDU) posted its biggest gain of the year, climbing 2.4 percent to 12,414.79.
The ECB is under pressure to lower rates and introduce more liquidity support for banks as governments struggle to fix a crisis that’s engulfing Spain and could force Greece out of the euro. Draghi stopped short of pledging longer-term financing to address the euro-zone’s debt crisis.
The Fed’s Lockhart indicated that he wouldn’t oppose the central bank extending the so-called Operation Twist, the maturity-extension program that’s scheduled to expire at the end of this month. The policy-setting Federal Open Market Committee meets June 19-20 to consider whether more stimulus is needed after the U.S. economy added the fewest jobs in a year in May.
Dangdang (DANG) jumped 11 percent, the most since Jan. 27, to $5.30 to extend its advance for the week to 16 percent. The Beijing-based company had fallen 39 percent in April and May.
SouFun, Home Inns
SouFun added 4.8 percent to $16.50, a four-week high, as the delay in capital rules pointed to the potential for increased real estate loans. Banks had warned regulators that tighter rules would restrict lending. Home Inns & Hotels Management Inc. (HMIN), a budget hotel operator based in Shanghai, climbed 6.6 percent to $22.04, a three-week high.
The Shanghai Composite Index (SHCOMP) slipped 0.1 percent yesterday to 2,309.56 while the Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong gained for a second day, adding 0.4 percent to 9,438.03.
“The growth in China is still significant and we believe the regime has firm control over the economy and is managing it well,” said Timothy Ghriskey, chief investment officer at New York-based Solaris Group, which manages about $2 billion in assets. “Considering that the government hasn’t had to take bigger steps such as cutting interest rates, that gives me confidence in the economy and the potential for stocks to rebound.”
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