China’s stocks rallied the most in three months, led by financial and commodity companies, on speculation the government will take measures to support economic growth after an unexpected drop in exports.
Ping An Bank Co. and Industrial Bank Co. rose more than 3 percent. Yanzhou China Coal Energy Co. jumped 10 percent, while Jiangxi Copper Co., the largest copper producer, surged the most since January. China Merchants Property Development Co. (000024), the third-biggest developer, rose 8.9 percent after the company said profit probably more than doubled in the first six months.
The Shanghai Composite Index (SHCOMP) gained 2.2 percent to 2,008.13 at the close, the biggest advance since March 20. The measure briefly retreated this morning after a government report showed exports fell 3.1 percent in June while imports slid 0.7 percent. The CSI 300 Index rose 2.8 percent to 2,224.06. The Hang Seng China Enterprises Index (HSCEI) added 1.9 percent.
“There’s some speculation about a cut in the reserve-requirement ratio and that’s probably behind the rally in cyclical stocks such as commodity and coal shares,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages $120 million. The odds of any policy loosening including a cut in the reserve ratio “are not that high,” he said.
The People’s Bank of China didn’t immediately respond to faxed questions seeking comment. The last time the central bank lowered the reserve ratio was in May 2012. A “benign” inflation outlook leaves room for fine-tuning measures to avoid a hard landing for the economy, Sun Junwei and Qu Hongbin, economists at HSBC Holdings Plc, wrote in a note today. More fiscal spending and a 25 basis-point cut in interest rates are likely options in coming months, they wrote.
The Shanghai measure has fallen 12 percent this year as data from industrial production to exports pointed to a sustained slowdown in the economy and as money-market rates reached record highs last month. The index trades at 8.2 times 12-month projected profit after valuations fell in June to the lowest level in at least five years, data compiled by Bloomberg show. Trading volumes today were 5 percent lower than the 30-day average.
Ping An Bank gained 4.4 percent to 9.40 yuan. Industrial Bank, part-owned by a unit of HSBC Holdings Plc, rose 3.5 percent to 9.45 yuan. China Minsheng Banking Corp. (600016), the first privately owned bank, added 2.4 percent to 8.60 yuan.
The Shanghai Composite property index surged 4.5 percent today. China Merchants Property climbed 8.9 percent to 26.80 yuan. First-half profit may have jumped between 105 percent and 113 percent from a year earlier, the developer said in an exchange statement. China Vanke Co. (000002), the nation’s biggest listed property developer, gained 6.4 percent to 10.28 yuan.
Chinese companies are scheduled to report first-half earnings from this month. UBS AG yesterday cut its earnings growth estimate to 8.7 percent for this year from the previous forecast of 11.5 percent.
Measures of material and energy stocks in the CSI 300 advanced 4.1 percent and 3.8 percent respectively. Yanzhou Coal, China’s fourth-biggest coal miner, surged by the maximum daily limit to 9.88 yuan. Jiangxi Copper, the nation’s biggest producer of the metal, advanced 5.4 percent to 16.30 yuan. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. (600111), China’s biggest producer of rare earth, jumped 10 percent to 23.24 yuan.
The decline in June exports compared with a 1 percent increase in the previous month and last year’s average monthly growth of 8.3 percent. The trade report follows May’s collapse in export gains after a crackdown on fake invoices that inflated data in the first four months of the year. The government’s annual target of trade growth is 8 percent.
A report from the statistics bureau yesterday showed consumer prices rose a higher-than-forecast 2.7 percent last month while producer prices fell 2.7 percent for its longest declining streak in a decade.
President Xi Jinping was cited by the Xinhua News Agency on June 29 as saying that officials shouldn’t be judged solely on their record in boosting gross domestic product, signaling a willingness of the nation’s leaders to tolerate slower expansion. The central bank will continue to implement a prudent monetary policy, governor Zhou Xiaochuan said at the annual Lujiazui Forum in Shanghai last month.
Money-market rates dropped for a 14th day, the longest run of declines in at least seven years, as the central bank refrained from draining funds from the financial system, easing a cash squeeze.
The 30-day volatility in the Shanghai Composite was at 24.2 today, the highest since February last year, according to data compiled by Bloomberg. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 0.9 percent in New York yesterday.
To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at email@example.com