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China Stocks Fluctuate as Stimulus Hopes Ease

China Stocks Fall From Two-Week High as Policy Speculation Eases
Sany Heavy Heavy Industry Co., China’s biggest machinery maker, lost 0.9 percent. The company reduced its Hong Kong share sale to about $2 billion, roughly 10 percent of its enlarged share capital, two people with knowledge of the transaction said. The offering may start in the next few months, they said. Photographer: Nelson Ching/Bloomberg

China’s stocks fell, dragging the Shanghai Composite Index from a two-week high, as the government damped speculation of a large-scale stimulus program to revive economic growth.

Anhui Chaodong Cement Co. and Hebei Iron & Steel Co. paced losses among building-material makers after Xinhua News Agency reported the nation has no plans to introduce stimulus measures on the scale deployed during the global financial crisis. Sany Heavy Industry Co., China’s biggest machinery maker, dropped 0.9 percent the company was said to cut the size of a share sale in Hong Kong. Gemdale Corp. advanced 1 percent as JPMorgan Chase & Co. recommended real-estate stocks.

The Shanghai Composite Index fell 0.2 percent to 2,384.67 at the close, with about five stocks declining for every four that advanced. The gauge climbed 2.4 percent in the past two days to its highest level since May 11. The CSI 300 Index retreated 0.3 percent to 2,642.26.

“The Xinhua report may disappoint investors and put them in doubt whether the current scale of the stimulus plans will be enough to reverse the slowdown in economic growth,” Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai, said by phone today. “Whether these measures will work needs to be closely watched.”

The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 3.2 percent in New York yesterday. Chinese equities climbed amid signs the government is stepping up measures to bolster consumption. The nation rolled out a 4 trillion yuan ($630 billion) package in 2008 to help the economy battle the global financial crisis.

Policy Speculation

The Shanghai Composite has slipped 0.5 percent this month. It has climbed 8.4 percent this year on optimism the government will ease monetary policies and accelerate approvals of infrastructure projects to spur growth. Stocks in the measure are valued at 10.3 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg.

Anhui Chaodong Cement lost 1.1 percent to 13.91 yuan. Jiangxi Wannianqing Cement Co. fell 1 percent to 14.87 yuan. Hebei Steel, the listed unit of China’s biggest steelmaker, slid 0.7 percent to 3.08 yuan.

Premier Wen Jiabao has vowed to focus more on increasing growth after trade and domestic demand were below forecasts in April, data that prompted economists to pare outlooks for the world’s second-largest economy. The government may spend as much as 2 trillion yuan to stimulate the economy, Credit Suisse Group AG said in a May 28 report.

Increased Lending

“The Chinese government’s intention is very clear: It will not roll out another massive stimulus plan to seek high economic growth,” Xinhua said yesterday in a Chinese-language article on economic policy, without attributing the information. “The current efforts for stabilizing growth will not repeat the old way of three years ago.”

Chinese lenders have received verbal instructions from their headquarters or regulators to increase lending to support economic growth, Market News International reported yesterday, citing unidentified people from the banking industry. The orders came in response to government signals of accelerated investment project approvals, it said.

Sany Heavy lost 0.9 percent. The company reduced its Hong Kong share sale to about $2 billion, roughly 10 percent of its enlarged share capital, two people with knowledge of the transaction said. The offering may start in the next few months, they said.

Kweichow Moutai Co., China’s biggest producer of baijiu liquor by market value, advanced 1.4 percent to 228.66. The liquor maker’s per-share earnings may rise 61 percent this year and 41.7 percent in 2013, Tong Xun and Zhang Xuejiao, analysts at Shenyin & Wanguo Securities, wrote in a report today.

Property Stocks

Thirty-day volatility in the Shanghai Composite was at 14.84 today, the highest level in a week. About 11.8 billion of the gauge’s shares traded yesterday, 31 percent higher than the daily average this year.

Gemdale, China’s fourth-biggest publicly traded property developer, rose 1 percent to 7.06 yuan. China Merchants Property Development Co. gained 0.8 percent to 25.96 yuan.

There’s market speculation that China may fine-tune restrictions on home purchase and China has room to ease policy implementation, especially in lower-tier cities, JPMorgan analysts led by Lucia Kwong, wrote in a note yesterday. Home transactions may beat expectations and decrease inventories, helping developers regain pricing power by the end of the year, according to the report.

PMI Data

China’s statistics bureau and logistics federation is due to release its purchasing managers’ index for May on June 1. The measure may fall to 52 from 53.3 a month earlier, according to the median estimate of 26 economists in a Bloomberg survey. Fifty is the dividing line between expansion and contraction.

The Bloomberg China-US Equity Index’s 3.2 percent gain yesterday in New York was the biggest since Jan. 3. SouFun Holdings Ltd., owner of China’s biggest real estate website, climbed 16 percent, the steepest advance in seven months. Spreadtrum Communications Inc. surged to the highest level in almost four months after Nomura Holdings Inc. and JPMorgan Chase & Co. recommended buying shares of the mobile-phone chipmaker.

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