China’s benchmark stock index rose after Premier Wen Jiabao said the government will focus more on bolstering economic growth, overshadowing concern Europe’s debt crisis will deteriorate.
CSR Corp. and China CNR Corp., the nation’s two biggest train makers, jumped at least 2.9 percent after the 21st Century Business Herald reported the railway ministry has gotten a credit line of more than 2 trillion yuan ($316 billion), signaling transport projects may resume. Cosco Shipping Co., a unit of China’s biggest shipping company, fell 2.1 percent after a gathering of the leaders of the Group of Eight nations failed to deliver a unified strategy to quell the European debt crisis.
“Premier Wen’s speech is a signal that future policies will emphasize growth,” said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. “It could be a change in fiscal, monetary or tax-related policies but for sure, the government is now eyeing the economy.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, added 3.78 points, or 0.2 percent, to 2,348.30 at the close, even as 497 stocks dropped and 393 gained. The CSI 300 Index advanced 0.5 percent to 2,587.23. The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. slid 7.2 percent in New York last week.
For the year, the Shanghai index has climbed 6.8 percent on expectations the government will relax monetary policies and take more measures to bolster equities. Stocks in the gauge are valued at 10.1 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg.
“The country should properly handle the relationship between maintaining growth, adjusting economic structures and managing inflationary expectations,” Wen said during a tour of Wuhan, the capital of Hubei province, from Friday to Sunday.
Wen’s remarks cited in the report, which didn’t mention concern about inflation, indicate the government might take more aggressive steps to support the economy after April data showed the slowdown may be sharper than expected. The central bank this month cut banks’ reserve requirement ratio for the third time since November to boost liquidity.
Gauges of energy and material stocks rose 1.4 percent and 1.2 percent respectively, the second- and third-biggest gainers in the CSI 300. China Shenhua Energy Co., the biggest coal producer, advanced 1.4 percent to 26 yuan, while Jiangxi Copper, the largest producer of the metal, jumped 2 percent to 25.61 yuan.
Copper rose 1 percent to $7,729.75 a metric ton by 7:32 a.m. on the London Metal Exchangee. Oil gained as much as 0.6 percent after falling to the lowest close in almost seven months on May 18.
China is seriously concerned about growth and ready to introduce further stimulus measures, Bank of America Merrill Lynch economist Lu Ting wrote in a note. He expects three more cuts in lenders’ reserve ratios before the end of the year as the chance of a cut in interest rates increases.
China CNR gained 2.9 percent to 4.28 yuan after the 21st Century Business Herald reported the railway ministry obtained a tentative credit line of more than 2 trillion yuan from banks. CSR Corp. advanced 3.4 percent to 4.83 yuan.
The government may further ease credit supply, start more projects, spend more on social welfare and quicken construction of social housing and infrastructure, especially in railway, subway, urban transit, water system and power grid, according to the Bank of America report.
Morgan Stanley is the latest brokerage to cut its gross domestic product estimate for China for this year. It lowered its forecast to 8.5 percent from 9 percent. Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp. and UBS AG pared their forecasts after April economic data were released.
Chinese shipping companies fell after a gathering of the leaders of the Group of Eight nations failed to deliver a unified strategy to quell the European debt crisis. Cosco Shipping, a unit of China’s biggest shipping company, slid 2.3 percent to 4.71 yuan. China Cosco Holdings Ltd. slipped 1 percent to 5 yuan.
The G-8 leaders who met at Camp David over the weekend pushed for Greece to stay in the euro area and supported boosting growth, even as Germany said Europe can’t spend its way out of the debt crisis. Europe is China’s biggest export market, making up about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.
“While there are legitimate economic concerns about China, the elephant in the room is the European sovereign situation,” Lewis Kaufman, a Santa Fe, New Mexico-based money manager at Thornburg Investment Management, who helps manage $79 billion, said in a phone interview. “It’s a difficult environment for risk markets, which means emerging markets including China.”
U.S.-Traded China Stocks
Chinese companies traded in the U.S. fell to the lowest valuations versus the biggest emerging markets in a year as Europe’s debt crisis deepened and growth in the world’s second-largest economy slowed.
Companies in the China-US gauge traded at the smallest premium to the average member of the MSCI BRIC Index of Brazil, Russia, India and China since March 2011, according to data compiled by Bloomberg.
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., slid 6.6 percent last week to $33, the lowest level since Oct. 20.
Suntech Power Holdings Co. and Yingli Green Energy Holding Co. tumbled more than 20 percent last week after the U.S. imposed tariffs on Chinese-made solar cells. Yanzhou Coal Mining Co. traded at a 2.2 percent discount to its Hong Kong shares.