China’s stocks rose, driving the benchmark index to its biggest gain in a month, on speculation the government will introduce measures to boost economic growth after new lending dropped and money supply growth slowed.
Huaxia Bank Co. jumped the most in 10 months after Samsung Securities said China may ease lending to small companies and rural areas. Ping An Insurance (Group) Co., China’s second-biggest insurer, climbed 3.2 percent after rival PICC Property and Casualty Co.’s first-half profit almost doubled. Haitong Food Group Co. led solar stocks higher as Shenyin & Wanguo Securities Co. said the industry will grow “rapidly” after the nation set benchmark prices for solar power.
“With some data indicating a slowdown, policies may be fine-tuned in the second half to allow faster growth,” said Dai Ming, fund manager at Shanghai Kingsun Investment Management & Consulting Co. “This will be positive for stocks.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, climbed 33.60 points, or 1.3 percent, to 2,626.77 at the 3 p.m. close, its biggest gain since July 13. It dropped 1.3 percent last week, a fourth week of declines, amid concern debt crises in Europe and the U.S. will hurt global economic growth. The CSI 300 Index rose 1.5 percent to 2,917.88.
The Shanghai Composite has slid 6.5 percent this year as the central bank raised interest rates five times and ordered lenders to set aside more cash as deposit reserves 12 times since the start of 2010 to contain inflation that quickened to the fastest pace in three years last month. The gauge is valued at 12 times estimated earnings, compared with a record low of 11.9 times for the multiple set in January 2006.
A measure of 52 financial stocks climbed 2.4 percent, the most among the CSI 300’s 10 industry groups. Huaxia Bank, partly owned by Deutsche Bank AG, surged 6.5 percent to 10.65 yuan, the biggest gains since Oct. 15. Shanghai Pudong Development Bank Co., the Chinese partner of Citigroup Inc., rose 3.8 percent to 9.37 yuan. Industrial Bank Co., part-owned by a unit of HSBC Holdings Plc, added 3.7 percent to 13.32 yuan.
Samsung Securities forecast “selective easing” for Chinese small- and medium-sized enterprises and rural lending in the second half of the year after data showed new bank loans, money supply growth and system deposits trailing estimates.
New lending was 492.6 billion yuan ($77.1 billion) last month, the People’s Bank of China said on its website on Aug. 12 after the market closed. That compared with the 550 billion yuan median estimate in a Bloomberg News survey of 21 economists and 633.9 billion yuan in June. M2, the broadest measure of money supply, rose 14.7 percent after a 15.9 percent gain in June, according to the central bank.
‘Past the Worst’
China’s local government debt risks are controllable and they can use their assets to generate cash, an unidentified official from the Ministry of Finance said in a report posted on its website.
Ping An Insurance gained 3.2 percent to 42.60 yuan. The stock retreated 2.5 percent last week, its fifth straight weekly decline.
“It’s probably because the valuation is low after the drop last week,” Tina Sun, analyst at Shenyin & Wanguo, said by telephone in Shanghai today. “PICC performed better. This may have positive effects on Ping An.”
PICC, the non-life insurer whose shares are traded in Hong Kong, said on Aug. 12 after the market closed that profit jumped 97 percent to 5.3 billion yuan in the first six months of the year.
China’s stock market is already “past the worst period” as the odds of policy over-tightening are declining and investment in affordable housing will offset a slump in economic growth, according to Citic Securities Co., the nation’s biggest listed brokerage.
The country started building more than 7.2 million units of affordable housing in the first seven months of this year, 72 percent of the country’s full year target of 10 million, according to a statement on the Ministry of Housing and Urban-Rural Development’s website on Aug. 12.
The possibility is increasing that inflation will ease in August and the effects of July monetary policy tightening are working, Citic analysts led by Xi Feng at the brokerage wrote in a note today. The Shanghai Composite may trade around 2,600 before rebounding in late September, it said. The brokerage recommends solar, agricultural and airline stocks.
Haitong Food, whose plan to swap assets with Changzhou Eging Photovoltaic Technology Co. has already been approved by the securities regulator, rose 3.4 percent to 40.46 yuan. Shanghai Chaori Solar Energy Science & Technology Co. jumped 6.1 percent to 22.15 yuan. Zhejiang Sunflower Light Energy Science & Technology Co. added 2.7 percent to 21.65 yuan.
China’s domestic solar power stations may earn profits on government-set benchmark solar power prices, Qi Qi and Zhang Teng, analysts at Shenyin & Wanguo Securities, wrote in a report. Domestic power grid operators will pay solar developers as much as 1.15 yuan per kilowatt-hour, the National Development and Reform Commission said on Aug. 1.