China’s stocks rose, capping a weekly gain, on speculation the government will ease monetary policy and global central banks will take action to bolster economies amid Europe’s sovereign debt crisis.
Industrial Bank Co. and Huaxia Bank Co. jumped more than 3 percent on the prospect the central bank will cut lenders’ reserve-requirement ratios for a fourth time since November. Jiangxi Copper Co. (600362) led gains among commodity producers as metal and oil prices increased. China Vanke Co. paced declines for developers on speculation this week’s rally was excessive.
“The market perceives a reserve-requirement ratio cut is likely given the weak momentum of the economy,” Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co., said by phone. “Banking stocks are pretty cheap and there’s no room for their stocks to drop further.”
The Shanghai Composite Index (SHCOMP) rose 10.9 points, or 0.5 percent, to 2,306.85 at the close, capping a 1.1 percent gain this week. The CSI 300 Index (SHSZ300) added 0.3 percent to 2,568.05 today. The Bloomberg China-US 55 Index (CH55BN), the measure of the most- traded U.S.-listed Chinese companies, slid 0.5 percent in New York yesterday.
Speculation the government will boost infrastructure spending and ease monetary policy have pushed the Shanghai index up 4.9 percent in 2012 after two years of declines. The central bank reduced deposit and lending rates for the first time since 2008 last week. Stocks in the measure are valued at 10 times estimated earnings, compared with the five-year average of 17.8, weekly data compiled by Bloomberg.
China can further cut its reserve ratio as M2 growth is “relatively slow” this year, according to a report by researchers at the Chinese Academy of Social Sciences published in the People’s Daily. Allowing banks to set aside less cash as reserves may encourage them to lend money to cash-strapped smaller companies.
Industrial Bank, part-owned by a unit of HSBC Holdings Plc, jumped 4.1 percent to 12.95 yuan. Huaxia Bank, partly owned by Deutsche Bank AG, added 3.6 percent to 9.50 yuan. Industrial & Commercial Bank of China Ltd., the nation’s biggest listed lender, rose 0.8 percent to 3.98 yuan.
The 16 banks trading on the Shanghai and Shenzhen stock exchanges trade at an average of 1.1 times their book value, compared with the multiple of 1.74 for the Shanghai Composite, according to data compiled by Bloomberg.
Thirty-day volatility in the Shanghai index was at 15.55 today, compared with this year’s average of 18.53. About 7.2 billion shares changed hands in the gauge yesterday, 18 percent lower than the daily average this year.
Monetary policy makers from the U.K. to Japan and Canada stepped up warnings about the threat to world financial markets should Europe fail to contain its debt crisis. Bank of England Governor Mervyn King said the central bank will activate a sterling liquidity facility to aid banks, and plans to have a form of credit easing operating to boost lending as the case for looser policy “is growing.”
Greece will hold general elections on June 17, which may determine if the nation upholds austerity conditions attached to international aid, and could lead to the first ouster from the euro area. Almost 10 million Greeks will vote for the second time in six weeks after a May 6 ballot failed to yield a government.
Europe is China’s biggest export market, making up about 18 percent of the nation’s overseas sales, according to Shenyin & Wanguo Securities Co.
Jiangxi Copper, China’s biggest producer of the metal, gained 1.2 percent to 24.97 yuan. Tongling Nonferrous Metals Group Co. (000630), the second largest, added 1.5 percent to 21.20 yuan. Zhuzhou Smelter Group Co., the nation’s biggest producer of refined zinc, climbed 2.3 percent to 11.11 yuan. Copper prices advanced 0.8 percent, while oil rose 0.9 percent in New York.
Threadneedle Investments is buying shares of consumer- discretionary companies and property developers because growth is picking up and the central bank may reduce reserve ratios, Gigi Chan, a fund manager at the company, which has $123.1 billion in assets under management, said in an interview in Singapore yesterday.
A measure tracking developers on the Shanghai Composite dropped 1 percent today, paring this week’s gain to 3.6 percent. Developers jumped after the central bank cut interest rates for the first time since 2008 last week.
Vanke, the nation’s biggest listed property developer, fell 1.8 percent to 9.11 yuan. Poly Real Estate Group Co., the second largest, slid 2.3 percent to 14.37 yuan. China Merchants Property Development Co. (000024) lost 3.9 percent to 24.97 yuan.
Inner Mongolia Yili Industrial Group Co., China’s biggest dairy producer by sales, tumbled by the 10 percent daily limit to 21.85 yuan after saying it recalled some of its products. Mercury can damage the central nervous system and the lungs or cause birth defects, with children especially vulnerable.
Chinese Internet stocks fell in New York, led by Youku Inc. (YOKU)’s first decline in two weeks, as Credit Suisse Group AG (CSGN) and Deutsche Bank AG reduced their growth forecast for Asia’s largest economy. The iShares FTSE China 25 Index Fund (FXI), the biggest U.S.-listed China exchange-traded fund, rose 0.2 percent to $33.75 yesterday.
--Zhang Shidong. Editors: Allen Wan, Chan Tien Hin
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