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Giant Jumps as Stimulus Bets Trigger ADR Rally: China Overnight

Chinese stocks traded in New York rose for a second day, as Giant Interactive Group Inc. (GA) surged the most since April, on prospects the government will take steps to shore up flagging growth in Asia’s largest economy.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in New York added 1.1 percent to 89.95 at the close of trading in New York. Online game developer Giant Interactive advanced 6 percent and software developer VanceInfo Technologies Inc. (VIT) climbed the most since February. Melco Crown Entertainment Ltd. (6883) rose for the first time in three days after the Philippines’ Belle (BEL) Corp. said it’s in talks with the Macau casino operator to set up a gambling complex in Manila.

China may introduce “more proactive” policies to ensure stable growth, the state-owned China Securities Journal said in a commentary published yesterday. Daiwa Securities Group Inc. and HSBC Holdings Plc cut their annual growth outlooks as manufacturing may have contracted for an eighth month. Companies on the Bloomberg China-US Index that reported earnings from Feb. 15 to May 16 missed analysts’ estimates by 19 percent, according to data compiled by Bloomberg.

“The biggest negative right now for Chinese stocks is that earnings are being cut,” Steven Bell, who manages $600 million in assets as principal portfolio manager at the GLC Ltd., a London-based hedge fund, said by phone yesterday. “So a mild broad-based stimulus is likely and it’s a reason investors may get in there.”

China ETF Climbs

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., increased 1.4 percent in its second day of gains to $32.63. The Shanghai Composite Index (SHCOMP) of mainland stocks slid 0.2 percent to 2,216.93, extending a six- day slump. The Standard & Poor’s 500 Index of U.S. shares climbed 0.9 percent to 1,331.85.

Shanghai-based Giant Interactive jumped the most since April 2 to $4.79 while VanceInfo, which counts International Business Machines Corp. (IBM), the world’s biggest computer-services provider, among its customers, surged 9.2 percent, the most since Feb. 1, to $9.69.

Melco Crown gained for the first time this week, adding 2.6 percent to $11.29 as Belle, which is controlled by companies belonging to Philippine billionaire Henry Sy, said it is in talks with the Macau casino operator to set up a gambling complex in Manila. Melco is the casino joint venture of Australian billionaire James Packer and a son of Hong Kong tycoon Stanley Ho.

Chinese monetary authorities may introduce policies to stabilize foreign trade, expand infrastructure investment, fine- tune monetary policies and structurally reduce taxes, according to commentary yesterday by the China Securities Journal.

Reserve-Requirement Ratio

The Shanghai Securities News reported on its front page yesterday that the People’s Bank of China may cut the reserve- requirement ratio next month as funds are expected to remain tight even after the 95 billion yuan ($14.9 billion) of reverse repos by the central bank on June 26. The ratio has been lowered three times since November.

Daiwa, Japan’s second-largest brokerage, cut its second- quarter growth forecast for China to 7.8 percent from 8.2 percent and its 2012 growth estimate to 8.3 percent from 8.4 percent, analysts Mingchun Sun and Chi Sun wrote in a note today.

Second-quarter growth of 7.8 percent would be the lowest since the global financial crisis in the first quarter of 2009, according to data compiled by Bloomberg. The economic data is scheduled to be released on July 13.

HSBC, Citigroup

HSBC on June 26 cut its 2012 estimate for China to 8.4 percent from 8.6 percent, while Citigroup Inc. lowered its forecast on June 25 to reflect “anemic” domestic activity in the second quarter and further weakening of European demand.

China’s economy will probably stay in the “doldrums” in coming months, preventing a second-half rally for the nation’s equities, according to Shenzhen-based Yu Guang of Invesco Great Wall Fund Management Co., the country’s best-performing fund manager. Property, auto and household-appliance stocks may outperform even as the overall market stalls, said Yu in an e- mailed interview on June 21.

Yu’s Core Competitiveness Fund has returned 25 percent this year, ranking it first among 714 China-based mutual funds, according to data compiled by Bloomberg as of June 25.

LDK Solar Co. (LDK), the world’s second-largest maker of solar wafers, fell after Roth Capital cut its 12-month price target to $1.70 from $3.50. LDK Solar’s American depositary receipts lost 4.2 percent to $1.82, a two-week low.

To contact the reporters on this story: Belinda Cao in New York at lcao4@bloomberg.net, and Leon Lazaroff in New York at llazaroff@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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