Chinese stocks in New York rebounded from a two-week low, led by Guangshen Railway Co. (GSH), on prospects next month’s leadership change will pave the way for more government measures to stimulate the economy.
The Bloomberg China-US Equity Index (HSCEI) of the most-traded Chinese shares in the U.S. rose for the first time this week, adding 0.4 percent to 92.20 yesterday in New York. Guangshen Railway surged to a five-month high as its discount to Hong Kong widened to the most in more than a week. Yingli Green Energy Holding Co. (YGE) led solar stocks lower after a report showed panel installations in Germany sank 46 percent in August.
China will debut its new leadership during the 18th Communist Party Congress starting Nov. 8. The new team inherits an economy that grew at the slowest pace since 2009 in the second quarter as sliding demand from the U.S. and Europe curbed exports of manufactured goods. BlackRock Inc. (BLK), the world’s biggest money manager, said yesterday that the economy will recover as the new leaders act to boost local consumption.
“When the new government is in place we are expecting additional stimulus over the next six months that will support the manufacturing and materials segments of the economy,” Audrey Kaplan, the New York-based lead manager of the $540 million Federated InterContinental Fund (RIMAX), said by phone yesterday.
Equities of China comprise 8.2 percent of the fund, which began the year with no Chinese positions, Kaplan said. They started buying at the end of the first quarter, she said.
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose for the fourth time in five days, gaining 0.7 percent to $35.26. The Standard & Poor’s 500 Index (SPX) slid 0.6 percent to 1,432.56.
Chinese policy makers have cut interest rates and reduced the amount major banks must keep in reserves twice this year. The money-market rate dropped for a second day yesterday on speculation cash supply will increase as the central bank adds funds to the financial system.
Shenzhen-based Guangshen Railway, which operates trains in China’s Guangdong province, jumped 4.4 percent to $17.65, the highest level since May 8. The company’s American depositary receipts, each representing 50 underlying shares in the company, traded 1.6 percent below its Hong Kong stock, the widest since Sept. 28. The Hong Kong shares jumped 4.5 percent to HK$2.78 yesterday.
China plans to invest 2.3 trillion yuan ($365 billion) in railroad infrastructure construction in the five years through 2015, Economic Information Daily reported on Oct. 9, without saying where it got the information.
“As China focuses more on its domestic economy, they need to improve efficiencies and move more transport off its highways and onto its railroads,” Alex Sulzer, who helps manage $1.2 billion, including Chinese equities at Morgan Meighen & Associates in Toronto, said by phone yesterday. “Guangshen has been down for so long, this may be a time to take another look at it.”
China’s railway traffic during an eight-day holiday ended Oct. 7, the so-called Golden Week, rose 13.4 percent from the same period a year ago to a record 80.33 million passengers, the nation’s Railways Ministry said on its website yesterday.
Pablo Goldberg, global head of emerging market research at HSBC Securities Inc., said that the bank has an “overweight” position in Chinese stocks in an interview with Bloomberg Television yesterday.
“We’re hoping for a bottoming of growth in the fourth quarter,” he said. “We’re expecting the stimulus in China to start to kick in as they start to deploy a little bit more after the leadership change.”
TAL Education Group (XRS), an after-school tutoring service provider, surged 4.4 percent in a second day of gains to $8.71, the highest level since Aug. 24.
TAL, based in Beijing, said it will report earnings for the quarter ended Aug. 21 before U.S. trading starts on Oct. 23. The company’s profit has beat analysts’ estimates for seven consecutive quarters, data compiled by Bloomberg show.
Shanda Games Ltd. (GAME), the third-biggest online games operator in China, advanced 2.7 percent to $3.77 in New York, the steepest gain since Sept 28. Baidu Inc. (BIDU), which owns the most- popular online search engine in China, rebounded 1.5 percent to $108.13, after a 6.8 percent tumble on Oct. 9.
Yingli, the world’s sixth-largest silicon-based solar module producer, plunged 5.7 percent to $1.66. Trina Solar Ltd. (TSL) slid 4.8 percent to $4.15, while Suntech Power Holdings Ltd. lost 2.3 percent to a one-week low of 89 cents.
Solar-panel installations in Germany, Europe’s biggest power market, dropped 46 percent in August from a year ago, grid regulator Bundesnetzagentur said yesterday on its website.
The Shanghai Composite Index (SHCOMP) added 0.2 percent to 2,119.94 yesterday, the highest level since Sept. 14. The Hang Seng China Enterprises Index of Chinese companies in Hong Kong advanced 0.7 percent to 10,041.11, the strongest since May 15.
Companies in the Shanghai gauge traded for 11.6 times their earnings yesterday, after reaching a multiple of 11.3 on Oct. 8, the lowest level since at least 1997. Twenty economists surveyed by Bloomberg predicted the world’s second-largest economy grew 7.4 percent in the three months ended Sept. 30, which would be the slowest pace since the first quarter of 2009.
Delegates from the Communist Party will gather in Beijing next month, when they are forecast to anoint Vice President Xi Jinping, 59, and Vice Premier Li Keqiang, 57, as the so-called fifth generation in charge, to replace President Hu Jintao and Premier Wen Jiabao.
For stocks to extend gains, the government needs to take more fiscal measures because monetary policy moves such as rate increases haven’t been effective, according to Hao Hong, chief China strategist at Bank of Communications Co. and the only forecaster among 13 strategists surveyed by Bloomberg at the start of 2012 to predict declines for equities this year.
Fundamental issues impeding Chinese growth need to be tackled, including tax reform and changes to state-owned enterprises, said David Cui, Bank of America Corp.’s chief China strategist.
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