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Yanzhou Coal Jumps as Stimulus Bets Spur Rally: China Overnight

Chinese stocks traded in New York posted their first weekly gain in a month as the nation’s infrastructure projects sparked speculation of further stimulus to boost growth in the world’s second-largest economy.

The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. advanced 1 percent this week to 88.84. Yanzhou Coal Mining Co., China’s fourth-largest producer, rallied 7.8 percent yesterday as Youku Tudou Inc. climbed 6.6 percent, the most since the two operators of video-sharing websites merged on Aug. 24. New Oriental Education & Technology Group Inc. jumped after Morgan Stanley said the shares will rise.

China approved plans to build 2,018 kilometers (1,254 miles) of roads, stoking prospects the government will step up efforts to revive growth in the economy, which is expanding at the slowest pace since 2009. In the U.S., a report showed payrolls increased less than expected in August, fueling speculation the Federal Reserve will start a third round of debt-buying under the quantitative-easing stimulus strategy.

“These very significant infrastructure announcements all go in the right direction of showing investors that more stimulus may be coming from China’s government,” Christian Deseglise, who helps oversee $426 billion at HSBC Global Asset Management, said by phone from New York yesterday.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose 2.8 percent to $33.66, the biggest intraday advance since June 29. The Standard & Poor’s 500 Index added 0.4 percent to 1,437.92, led by commodity and financial stocks.

Road, Subway Projects

A plan to build highways, sewage-treatment plants and other projects came a day after the National Development & Reform Commission, the country’s top economic planner, backed subway projects in 18 cities. The measures are efforts to ensure that China’s economic slowdown doesn’t worsen.

Goldman Sachs cut its estimate for China’s 2012 gross domestic product growth to 7.6 percent from 7.9 percent and reduced its 2013 forecast to 8 percent from 8.5 percent, economists Li Cui, Yu Song, MK Tang and Yin Zhang wrote in a Sept. 6 note to clients, citing softer external demand.

The U.S. jobless report comes a week after Fed Chairman Ben S. Bernanke called unemployment a “grave concern.” The economy added 96,000 workers in August, less than a median estimate of 130,000 forecast by 92 economists surveyed by Bloomberg. Further action by the Fed would follow European Central Bank President Mario Draghi, who said on Aug. 6 that the ECB plans to begin an unlimited bond-purchase program, aimed at easing the region’s debt crisis and stabilizing exports from developing nations including China.

Export Sector

“The export sector in China has been suffering from weakness in growth in Europe,” Deseglise added. “Anything that lifts clouds there will be good.”

Chinese financial and real estate stocks are likely to benefit from increased government spending plans after “having been beaten down in recent months,” Deseglise said.

Hao Hong, Bocom International Holdings Co.’s managing director for research, cited the government’s infrastructure spending plans as a catalyst for Chinese equities. The government is likely to introduce more policies to bolster economic growth, Hong Kong-based Hong wrote in an e-mail on Sept. 7.

“Sentiment is depressed and expectation is so low that any change in expectation alone is enough for a rebound,” Hong wrote in the e-mail. “Investors should participate in this tradable rebound.”

New Oriental

Yanzhou rose 12 percent to $14.74 over the past two days, its biggest such advance since Oct. 27. The Shandong Province-based coal producer had lost 38 percent this year through Sept. 5 as the price of the commodity declined due to weaker global demand.

New Oriental, an education services provider, jumped to the highest in seven weeks as Morgan Stanley forecast the shares “will rise in absolute terms over the next 60 days.”

American depositary receipts of New Oriental climbed 5.7 percent to $14.79, the highest closing price since July 16. The Beijing-based company fell 34 percent on July 17 after saying the U.S. Securities and Exchange Commission was investigating its financial statements.

“Although its fundamental value may not be realized in the near-term due to the ongoing SEC investigation, we believe its business fundamentals remain sound and the recent share price weakness offers a buying opportunity,” Philip Wan, an analyst at Morgan Stanley in Hong Kong, wrote in an e-mailed report yesterday.

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