SouFun Leads Rally on New Stimulus Speculation: China Overnight

Chinese stocks traded in the U.S. jumped the most in four months, led by SouFun Holdings Ltd., on prospects the government will take additional measures to counter a slowdown in the world’s second-largest economy.

The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. rose 3.2 percent to 93.50 yesterday in New York, the biggest gain since Jan. 3. SouFun, owner of China’s biggest real estate website, climbed 16 percent, the steepest advance in seven months. Spreadtrum Communications Inc. surged to the strongest level in 16 weeks after Nomura Holdings Inc. and JPMorgan Chase & Co. recommended buying shares of the mobile-phone chipmaker.

The Chinese government may spend as much as 2 trillion yuan ($315 billion) to stimulate the economy through infrastructure projects, Credit Suisse Group AG said in a May 28 report. The bank’s comments come a week after Premier Wen Jiabao called for a greater focus on growth as economic indicators signaled slower expansion in China at a time concerns Greece may leave the euro are mounting.

Chinese stocks “are reacting to the potential for more stimulus and more easing,” Jeff Papp, a senior analyst at Oberweis Asset Management Inc., which manages $700 million, said by phone yesterday from Lisle, Illinois. China still has the ability to control the situation if there is “some kind of external shock that slows down their economy more than what they want,” he said.

China has no plans to introduce stimulus measures on the scale deployed during the global financial crisis to counter this year’s economic slowdown, the official Xinhua News Agency said yesterday. The Asian nation rolled out a 4 trillion yuan spending package in 2009 to help the economy battle the global financial crisis.

China ETF Jumps

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., surged 4 percent to $33.88, posting the biggest gain this year. The Shanghai Composite Index of mainland stocks added 1.2 percent to a two-week high of 2,389.64. The Standard & Poor’s 500 Index of U.S. shares gained 1.1 percent to 1,332.42 as data showing stabilization in the housing market bolstered optimism the economy will withstand Europe’s debt crisis.

The People’s Bank of China cut reserve-requirement ratios for lenders by 50 basis points, or 0.5 percentage point, on May 12, the third reduction in six months. It has kept interest rates on hold since July.

Beijing Home Sales

Beijing-based SouFun advanced 16 percent to $16.26, the biggest daily increase since Oct. 12.

New home transactions by unit in Beijing this month as of May 26 had risen to a 16-month high, before the government imposed property curbs, China News Service reported May 28, citing online official data.

American depositary receipts of Shanghai-based Spreadtrum jumped 10 percent to $18.20, the highest level since Feb. 3.

Spreadtrum was the biggest winner in a handset tender at China Mobile Ltd., the world’s largest phone company by users, news portal NetEase’s website reported on May 25, citing unidentified sources. The results prompted Nomura to raise its recommendation on Spreadtrum shares to buy from neutral and JPMorgan to boost its rating to overweight from neutral.

Spreadtrum’s stock jumped because the result of the tender was better than expectations, Mike Walkley, a communications technology analyst at Canaccord Genuity Ltd. in Minneapolis, said by phone yesterday.

Sales Outlook

The tender will help Spreadtrum’s sales in the second quarter and “increase investors’ confidence that Spreadtrum’s chips for China Mobile’s handsets will ship in larger volumes in the third and fourth quarter,” Walkley said, recommending to buy the stock with a 12-month price target of $21.

ADRs of Aluminum Corp. of China Ltd., the nation’s largest maker of the lightweight metal also known as Chalco, soared 8.3 percent to $10.91, the biggest jump since Nov. 2. The ADRs, each representing 25 underlying shares of Chalco, traded 0.05 percent below its Hong Kong stock, the smallest discount in a week.

Focus Media Holding Ltd., a digital advertising company based in Shanghai, climbed 4.4 percent to a two-week high of $22.33.

The company’s first-quarter net income surged 85 percent from a year ago to $37.9 million, Focus Media said in a statement distributed by PR Newswire May 28. Sales rose 36 percent to $199.6 million, beating the $193.6 million average forecast of five analysts in a Bloomberg survey.

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