China’s Stocks Advance After Premier Wen Signals Stimulus
Anhui Conch Cement Co. and Sany Heavy Industry Co. led gains for construction-related stocks on speculation they will benefit from government spending on infrastructure. Jiangxi Copper Co. (600362) surged 3.3 percent on the prospect the U.S. Federal Reserve will increase stimulus by buying bonds, bolstering the outlook for commodities demand. China Eastern Airlines Corp., the nation’s second-largest carrier, jumped the most in eight months after it said it plans to raise funds from its parent.
“Expectations are coming back the government will step up measures to stabilize growth,” said Dai Ming, a fund manager at Hengsheng Hongding Asset Management Co. in Shanghai, which manages $190 million. “It looks like the government has more ammunition in hand to boost growth given recent remarks and actions by top officials and government departments.”
The Shanghai Composite Index (SHCOMP) rose 0.3 percent to 2,126.55 at the close, as three stocks gained for each one that fell. The CSI 300 Index (SHSZ300) added 0.4 percent to 2,320.07. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong climbed 1.1 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 1.7 percent in New York yesterday.
The Shanghai Composite had fallen 3.3 percent this year on concern the government isn’t loosening monetary policy or introducing stimulus policies fast enough to counter the slowdown in the economy. The index is valued at 9.7 times estimated earnings, compared with the 17.4 average since Bloomberg began compiling the weekly data in 2006.
China still has “ample strength” in either monetary or fiscal domains to propel economic growth, Wen said yesterday at the World Economic Forum in the city of Tianjin, adding the government has 100 billion yuan ($16 billion) in a fiscal stabilization fund.
“We will appropriately use that for preemptive policy and fine-tuning to propel stable economic growth,” he said, reiterating the country will continue to place more emphasis on ensuring stable growth.
Anhui Conch, the biggest cement producer, added 1.9 percent to 15.27 yuan. Sany Heavy, the largest machinery maker, gained 1.1 percent to 10.18 yuan. Zoomlion Heavy Industry Science and Technology Co., China’s second-biggest maker of construction equipment, rose 1.7 percent to 9 yuan.
The government is trying to prevent economic growth this year from slipping below the 7.5 percent target set in March. Morgan Stanley today became at least the fifth bank to estimate that growth will be 7.5 percent, the weakest pace in 22 years, after imports slid in August and industrial production cooled.
China may expand tax cuts or subsidize interest on loans to boost consumption, the Financial News reported today, citing unidentified industry people.
Jiangxi Copper, China’s biggest producer of the metal, climbed 3.3 percent to 22.69 yuan. Zijin Mining Group Co., the nation’s largest gold producer, added 1 percent to 3.99 yuan.
The Federal Open Market Committee will discuss additional measures in a two-day meeting to stimulate the U.S. economy. Fed Chairman Ben S. Bernanke said on Aug. 31 he wouldn’t rule out steps to lower an unemployment rate he described as a “grave concern.”
China Eastern surged 5.2 percent to 3.46 yuan, the biggest gain since Jan. 17. The carrier will sell 698.9 million domestic shares at 3.28 yuan apiece and 698.9 million Hong Kong-listed shares at HK$2.32 each to its state-owned parent to pare debts, it said in a statement.
Thirty-day volatility in the Shanghai Composite was at 16.2 yesterday, compared with this year’s average of 17. About 8 billion shares changed hands in the gauge, 2.6 percent higher than the daily average this year.
China’s impending leadership change will fail to bolster stocks because policies will be little changed during the initial stages of the country’s new administration, said Central China Securities Co. and ICBC Credit Suisse Asset Management Co.
The Shanghai Composite rose an average 0.2 percent in the month leading up to the four national congresses to elect the top leaders of the Chinese Communist Party since 1992. It dropped an average 14 percent in the same duration after, with a 39 percent plunge in 1992 dragging the result lower.
‘No Stock Reaction’
“History shows that there’s no major stock reaction to the party congresses,” said Li Jun, a strategist at Central China Securities in Shanghai. “The reason could be that top officials are inclined to maintain stable policies during transitions.”
Party chief Hu Jintao and most of the nine members of the Standing Committee of the Politburo are expected to hand power this year at the 18th congress, the date for which hasn’t been announced. The six congresses since 1982 were all held between September and November.
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., climbed 1 percent to $33.40 yesterday.
--Zhang Shidong. Editors: Allen Wan, Richard Frost
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