China’s stocks rose, driving the benchmark index to the biggest advance in almost two months, after the government said it will more than double the amount foreigners can invest in equities, bonds and bank deposits.
Citic Securities Co. jumped more than 5 percent, leading a rally for brokerages, after the China Securities Regulatory Commission increased quotas for qualified foreign institutional investors to $80 billion from $30 billion. Suning Appliance Co. and Kweichow Moutai Co. paced gains for consumer companies after Credit Agricole CIB said borrowing costs will be cut this month. Aluminum Corp. of China Ltd. added 3.7 percent after the 21st Century Business Herald said the parent company plans to boost investment in rare earth production in Guangxi province.
“Investors think the increase in QFII quotas will boost blue-chip stocks in China, so shares are rising today,” said Chen Liqiu, a strategist at Jianghai Securities Co. in Shanghai. “In the mid-to-long term, such a policy will definitely spur gains for Chinese equities.”
The Shanghai Composite Index rose 39.45 points, or 1.7 percent, to 2,302.24 at the close, the most since Feb. 8. The CSI 300 Index climbed 2.4 percent to 2,512.83. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, dropped 1.7 percent to 101.89 yesterday in New York.
China accelerated the opening of its capital markets by more than doubling the amount foreigners can invest in stocks, bonds and bank deposits as the government shifts its growth model to domestic consumption from exports. Offshore investors will also be allowed to pump an extra 50 billion yuan ($7.9 billion) of local currency into the country, up from 20 billion yuan, according to a statement on its website April 3.
Citic Securities, the biggest-listed brokerage, gained 5.8 percent to 12.26 yuan. Haitong Securities Co. rallied 7.8 percent to 9.71 yuan.
The regulator had granted a total of $24.6 billion in quotas to 129 overseas companies since the program first started in 2003 through the end of March. About 75 percent of assets were invested in Chinese stocks, with the rest in bonds and deposits, according to the statement.
The Shanghai index has dropped 6.4 percent from this year’s high on March 2 on concern the world’s second-biggest economy is stalling as the government’s property curbs and tight monetary policies reduce profits. It’s still up 4.7 percent since Dec. 31. About 6.2 billion shares changed hands in the Shanghai Composite on March 30, or 24 percent lower than the daily average this year, according to data compiled by Bloomberg. Thirty-day volatility on the gauge was at 17.5.
China is “almost guaranteed” to either cut interest rates or reserve requirement ratios in April, Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole, said in a Bloomberg television interview yesterday. The strategist cited comments made by Premier Wen Jiabao on April 3 that he plans to release fine-tuning measures “soon.”
The People’s Bank of China cut the amount lenders must keep in reserve on Feb. 24 for the second time since December. China hasn’t reduced interest rates since 2008. Investors speculated the central bank may ease policies to boost the economy. China trimmed the nation’s growth target to 7.5 percent from an 8 percent goal in place since 2005, a signal that leaders are seeking to shift toward expansion driven more by domestic consumption as against exports and capital spending.
Gauges of consumer staples and discretionary companies rose 3.5 percent and 2.8 percent respectively in the CSI 300. Kweichow Moutai, the biggest maker of baijiu liquor, surged 4.6 percent to 206 yuan, while Suning Appliance, China’s biggest electronics retailer by market value, jumped 5.6 percent to 10.30 yuan.
Wen highlighted challenges facing his nation during a provincial tour over April 1-3, saying some economic indicators are slowing, according to a statement from the state-run Xinhua News Agency on April 3.
Zhang Xiaoqiang, vice chairman of the National Development and Reform Commission, said China’s economy may have expanded about 8.4 percent in the first quarter, the least since the first half of 2009. He spoke on April 3 during a panel discussion at the Boao Forum for Asia and was citing “relevant China research institutes’ initial figures” for the estimate.
The purchasing managers’ index for the services industry was 53.3 last month, compared with 53.9 in February, according to a statement issued by HSBC Holdings Plc and Markit Economics today. A reading above 50 indicates an expansion.
Chalco gained 3.7 percent to 6.81 yuan after 21st Century Business Herald reported on April 2, without citing anyone, that its parent plans to invest an additional 5.2 billion yuan in rare earth production in the southern Guangxi province.
China needs to break a banking “monopoly” of a few big lenders that make easy profits because it’s hard to borrow money elsewhere, Wen said. Earnings at China’s biggest banks are growing even as a cooling economy triggers loan defaults.
Industrial & Commercial Bank of China Ltd., the biggest lender, slid 0.7 percent to 4.30 yuan, while largest rival China Construction Bank Corp. declined 0.8 percent to 4.79 yuan.
The IShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., sank 1.5 percent to $36.63 yesterday, the steepest one-day drop in two weeks.
Stocks on the Shanghai Composite Index trade for 9.7 times estimated earnings, compared with an average valuation of 23.8 times for equities in the Bloomberg measure for U.S.-traded Chinese companies.
-- Editors: Allen Wan, Matthew Oakley