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China Stocks Rise as Commodities Gain on Possible U.S. Stimulus

China’s stocks rose to the highest in a week, led by commodity producers, after U.S. Federal Reserve Chairman Ben S. Bernanke said he is prepared to provide additional stimulus to boost the economy.

Zijin Mining Group Co., the nation’s biggest producer of bullion, climbed to a seven-month high as Euro Pacific Capital Inc. predicted gold may surge to $2,000 if the Fed starts a third round of U.S. debt purchases. Jiangxi Copper Co. rose 2.7 percent after global commodity prices climbed to a four-week peak. Poly Real Estate Group Co. paced declines for property developers after Market News International cited the nation’s economic planners as saying policy tightening will carry on.

“The QE3 will provide a short-term boost to the U.S. and the asset markets including stocks and commodities as the whole financial system will be flooded with cash,” said Sun Chao, an analyst at Citic Securities Co., China’s biggest brokerage. “On the domestic front, local investors still expect the government to ease policy tightening and growth to pick up again.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, climbed 14.97 points, or 0.5 percent, to 2,810.44 at the 3 p.m. close, the highest since July 6. The CSI 300 Index added 0.3 percent to 3,115.75.

The Shanghai gauge gained the most since July 4 yesterday after a government report showed China’s economy grew at faster-than-expected 9.5 percent in the second quarter and industrial production rose more than estimated in June. The index has added 0.1 percent this year.

Commodity Stocks

Gauges of energy and material stocks advanced 1.4 percent and 1.2 percent respectively today, the two biggest gainers among the CSI 300’s 10 industry groups.

The Standard & Poor’s GSCI index of 24 commodities rose 1.2 percent to 698.04 yesterday, the highest close since June 14. Gold futures gained to a record yesterday in New York.

Gold prices, which advanced to a record of $1,589.80 an ounce today, may surge to $2,000 if the Fed starts a third round of U.S. debt purchases, according to Michael Pento, economist at Euro Pacific. “People will be forced into buying gold.”

Zijin Mining surged 6.3 percent to 5.78 yuan, its highest close since Dec. 7. Jiangxi Copper, the largest copper producer, rose 2.7 percent to 37.05 yuan. Zhuzhou Smelter Group Co., the biggest producer of refined zinc, advanced 4.5 percent to 18.22 yuan. China Shenhua Energy Co., the largest coal producer, gained 0.4 percent to 30.40 yuan.

Fed Stimulus

Fed Chairman Bernanke told Congress the central bank is prepared to take additional action, including buying more government bonds, if the economy appears to be in danger of stalling. The Fed completed a program last month to buy $600 billion of Treasury bonds that aimed to stimulate the economy by reducing borrowing costs, boosting stock prices and spurring consumer spending. The second round of so-called quantitative easing was known as QE2 among investors.

Hunan Dakang Pasture Farming Co., a pig farmer, jumped 2.8 percent to 18.50 yuan. Henan Chuying Agro-pastoral Co. added 2.8 percent to 34.78 yuan.

China will boost subsidies and wages for raising hogs to support the industry, according to a statement on a Chinese government website yesterday, citing a meeting chaired by Premier Wen Jiabao. The measures include offering 100 yuan ($15.5) subsidies for each reproductive sow, it said.

Consumer prices in June were mostly pushed up by rising food and pork costs. Inflation climbed to a three-year high of 6 percent last month, the statistics bureau said on July 9. That exceeded the previous month’s 5.5 percent and the government’s full-year target of 4 percent.

Rate Outlook

The central bank has raised interest rates five times and the reserve-requirement ratio 12 times since the start of 2010 to tame inflation that reached a three-year high last month.

China may raise borrowing costs once more if inflation remains at elevated levels, Market News International reported today, citing an unidentified person close to the National Development and Reform Commission.

Tightening will continue into the second half of this year, Market News said, citing the person familiar with discussions at the top levels of the planning body. Consumer prices may rise 6.2 percent in July, Market News said, citing the person.

Poly Real Estate, China’s second-largest developer by market value, dropped 0.6 percent to 10.90 yuan. China Vanke Co., the biggest, retreated 0.4 percent to 8.58 yuan. China Merchants Property Development Co. lost 0.9 percent to 18.52 yuan.

Moody’s Investors Service put the U.S., rated Aaa since 1917, under review for a credit-rating downgrade for the first time since 1995 on concern the government’s $14.3 trillion debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes even though the risk remains low.

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