Chinese stocks rallied, with a gauge of Hong Kong-traded (HSCEI) mainland companies erasing this year’s decline, on speculation the government is accelerating measures to support the housing market.
China Vanke Co. (000002), the nation’s biggest developer, climbed 5.7 percent in Hong Kong while China Resources Land Ltd. added 7.5 percent. A Bloomberg News survey showed that banks will probably offer discounted mortgage rates in the second half of this year. Anhui Conch Cement Co. and Jiangxi Copper Co. advanced in Hong Kong and Shanghai. China Cinda Asset Management Co. posted its biggest two-day advance in six months on speculation earnings will jump.
The Hang Seng China Enterprises Index, also known as the H-share index, rose 2 percent to 10,820.71 at the close in Hong Kong. The index has rebounded 18 percent from a March low as China accelerated spending, allowed some local governments to loosen property curbs and cut reserve-requirement ratios for some lenders. China averted its second company bond default as Huatong Road & Bridge Group Co. made all payments due today.
The government may engage in “monetary easing and support the housing market,” said Benjamin Tam, a fund manager who helps oversee about $1.5 billion at IG Investment Management (Hong Kong) Ltd. “People are still optimistic that the government policies will support growth in China. All of that is positive and that’s why the market is moving higher.”
The Hang Seng Index rose 0.8 percent to 23,971.87. The Shanghai Composite Index (SHCOMP) added 0.1 percent to 2,078.49. The CSI 300 Index climbed 0.2 percent. The Bloomberg China-US Equity Index, the measure of the most-traded U.S.-listed Chinese companies, added 1.9 percent yesterday.
The H-share gauge has gained 4.7 percent this month amid signs China’s economy is stabilizing. Data last week showed growth accelerated for the first time in three quarters in the April-June period. Manufacturing probably expanded this month at the fastest pace since March last year, according to a Bloomberg poll before a preliminary Purchasing Managers’ Index due tomorrow from HSBC Holdings Plc and Markit Economics.
Policy makers lowered reserve requirements for some banks in June, while the Finance Ministry called for faster spending of budgeted funds on May 28. Regulators increased banks’ lending capacity this week by changing the way loan-to-deposit ratios are measured.
“The markets are probably starting to run ahead of the central bank in the sense that they are discounting quite a bit of monetary easing coming through,” said Sean Darby, global head of equity strategy at Jefferies LLC. “China’s shares stand at extreme discount to their peer group. China compared to most of the world today has been running a very tight policy for nearly two years.”
The H-shares gauge trades at 7.2 times 12-month projected earnings, compared with a multiple of 7.7 for the Shanghai index, according to data compiled by Bloomberg. Huaneng Power International Inc. jumped 36 percent this year while BYD Co. soared 31 percent to lead gains on the H-shares measure.
Vanke gained 5.7 percent to HK$17.12 in Hong Kong, while its A shares added 2.3 percent to 9.39 yuan in Shenzhen. China Resources Land surged 7.5 percent to HK$16.86. Jiangxi Copper surged at least 3.8 percent in Hong Kong and Shanghai, while Anhui Conch rose 3.1 percent to HK$30.10 in Hong Kong.
Sina.com reported today that Haikou has become the latest city to relax home-purchase restrictions. Hohhot in northern China and Jinan in the east have already loosened property curbs as government data last week showed new-home prices fell in 55 of the country’s 70 largest cities in June, the highest ratio since January 2011.
“We may be close to near-term bottom of the property sector,” Michael Wang, an emerging-markets strategist at Amiya Capital LLP, said by e-mail from London. The easing measures “obviously help commodities, cement and property stocks. The economy should look OK from a growth perspective, and we should see another sequential acceleration.”
Banks will resume preferential mortgage rates, according to 74 percent of analysts and economists in a survey conducted from July 14 to July 17. Fifty-six percent forecast lower minimum down payments, while 59 percent said they expected the central bank to ease its mortgage restrictions. A total of 29 economists and analysts responded to the survey.
China Cinda jumped 4.9 percent to HK$4.31, extending yesterday’s 4.6 percent gain. The stock gained after rival China Huarong Asset Management Co. sold a 20 percent stake to investors including Goldman Sachs Group Inc. and China International Capital Corp. Cinda’s first-half profit probably rose 35 percent from a year earlier, according to CICC analysts led by Junhua Mao.
Gome Electrical Appliances Holding Ltd. jumped 6.9 percent to HK$1.39 in Hong Kong after saying six-month net-income may more than double. China Modern Dairy Holdings Ltd. rose 1.4 percent to HK$3.71 after Daiwa Securities Group analysts estimated first-half sales will jump more than 80 percent.
Huatong Road & Bridge Group Co., a builder based in the northern province of Shanxi, paid all principal and interest on a 400 million yuan ($65 million) bond maturing today, four people familiar with the matter said, asking not to be identified because they weren’t authorized to speak publicly. An operator who answered the phone at the company declined to comment or transfer the call.
About 330 companies on the Hang Seng Composite Index are scheduled to report earnings from this week through the end of August, according to data compiled by Bloomberg.
The ChiNext index of smaller companies tumbled 2.7 percent in Shenzhen today, closing at the lowest level since May 22. The gauge led mainland markets lower today as earnings growth slows and valuations are still high, said Dai Ming, a money manager at Hengsheng Hongding Asset Management Co. in Shanghai, by phone.