Chinese shares rose for the first time in four days after the first contraction in manufacturing in nine months spurred speculation the government will introduce more stimulus measures.
China Vanke Co. (000002), the nation’s largest developer by market value, gained the most in two months after SouFun Holdings Ltd. said August home prices increased. Citic Securities Co. (600030), China’s biggest listed brokerage, paced gains among brokerages after the China Securities Regulatory Commission allowed trust companies to resume investing in equities. Manufacturing slowed further in August, surveys of purchasing managers showed Sept. 1 and today, with one gauge at the lowest level since March 2009.
“The PMI has led to more concern that the economy is worsening,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Investors’ confidence is quite low and the latest numbers don’t help the situation. However, the silver lining for this situation is there may be more possibilities of reserve ratio requirement cuts and other loosening measures.”
The Shanghai Composite Index (SHCOMP) added 0.6 percent to 2,059.15 as of the close, rebounding from the lowest level since February 2009. The gauge trades at 9.3 times estimated earnings, the lowest level since January, according to weekly data compiled by Bloomberg. Trading value sank to 35 billion yuan ($5.6 billion) on Aug. 31, the lowest since Dec. 31, 2008.
The CSI 300 Index (SHSZ300) rallied 1.1 percent to 2,228.37. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong advanced 0.5 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, fell 0.2 percent in New York.
Signs that China’s economic slowdown is deepening have dragged the Shanghai Composite down 7.5 percent this quarter. The gauge sank 2.7 percent in August, a fourth straight month of declines. That’s the longest streak since August 2004, according to data compiled by Bloomberg.
U.S. shares rallied on Aug. 31 after Federal Reserve Chairman Ben S. Bernanke’s 24-page speech at the Kansas City Fed’s symposium made the case for further monetary easing and concluded that the central bank’s non-traditional policy tools such as bond purchases have been effective in boosting growth and improving financial conditions.
The Purchasing Managers Index fell to 49.2 in August from 50.1 in July, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing. A separate manufacturing PMI released today by HSBC Holdings Plc and Markit Economics was at 47.6, indicating the fastest contraction in more than three years.
China should “decisively” expand the strength of its fine-tuning in accordance to the changes in the economy and markets, People’s Daily said in a front-page essay by an unidentified commentator. The nation should have a “reserve” of fiscal, tax, financial, foreign trade and industrial policies to counter complex and difficult situations and study a suitable time to activate these policies, according to the commentary.
Policy makers lowered interest rates in June and July after two reductions in reserve-requirement ratios for lenders this year as the economy expanded at the slowest pace since 2009. An index of non-manufacturing industries released today showed an expansion to 56.3 in August from 55.6 the previous month.
The property gauge was the best performer among five industry groups on the Shanghai index today, rising 3.3 percent. China Vanke gained 3.4 percent to 8.29 yuan in Shenzhen. Poly Real Estate Group Co. (600048) surged 7.7 percent to 10.13 yuan, the biggest advance since Jan. 4.
China’s home prices rose 0.24 percent in August from a month earlier to 8,738 yuan ($1,377) a square meter, said SouFun, the country’s biggest real estate website owner, in a statement today. Citigroup Inc. said in a report dated Aug. 31 Chinese property shares are set to rally as sales volume rebounds.
Citic Securities gained 2.9 percent to 10.52 yuan. Haitong Securities Co. (600837), the country’s second-largest brokerage by market value, advanced 4.6 percent to 8.64 yuan. China will reopen its stock markets to trust companies to help increase the number of investors, according to a statement posted on the China Securities Regulatory Commission website. The notice, posted on Aug. 31, didn’t specify when the change will take effect.
Policy makers are trying to revive confidence in capital markets and boost economic growth, as the Shanghai Composite fell on Aug. 31 to the lowest level since February 2009.
Brokerages to Rally
The regulator has already announced a 20 percent reduction in transaction fees on equities trading. That cut will save investors 600 million yuan in the last four months of the year, the regulator estimated on Aug. 2.
“The government has been releasing a lot of positive measures for brokerages,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “In the medium term, brokerage stocks look likely to rally, as these new businesses will improve their profitability.”
Everbright Securities Co. (601788) rallied 3.1 percent to 11.34 yuan. The brokerage said on Aug. 31 it won approval for a margin financing trial, according to a statement to the Shanghai Stock Exchange.
Weichai Power Co. (000338), China’s biggest maker of heavy-duty trucks, jumped 5.2 percent to 17.99 yuan in Shenzhen trading, the largest increase since February 2011, after agreeing to a 738 million euro ($927 million) investment in forklift maker Kion Group GmbH.
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