China’s stocks rebounded from a four-year low, led by financial companies, after money-market rates dropped and on speculation the government will ease financing for developers to alleviate a credit crunch.
Industrial & Commercial Bank of China Ltd. and PetroChina Co., which have the two biggest weightings on the Shanghai Composite Index, rallied the most since 2010 in the last 15 minutes of trading. China Vanke Co. and Poly Real Estate Group Co., the largest developers, surged more than 6 percent, leading a measure of property stocks to the biggest gain in four months.
“Big-caps such as banks and developers have dropped to very low levels,” making them attractive, said Zhang Ling, general manager at Shanghai River Fund Management Co. “There isn’t any more room for declines in the indexes.”
The Shanghai Composite climbed 1.5 percent to 1,979.21 at the close, paring losses to 4.5 percent this week, the biggest loss since the five days ended Feb. 22. It closed at the lowest level since January 2009 yesterday. The CSI 300 Index advanced 1.9 percent to 2,200.64 while the Hang Seng China Enterprises Index added 1.6 percent.
The Shanghai index erased gains in the afternoon before rebounding in the last 15 minutes of trading, fueled by rallies for ICBC, the nation’s biggest lender, and PetroChina, the largest energy company. ICBC gained 5.5 percent to 4.02 yuan, the most since November 2010. PetroChina rebounded from a record low this week, advancing 3.4 percent to 7.61 yuan, the largest gain since December 2010.
“There’s speculation there’s an invisible hand in the market, that the government is adding funds into ICBC and PetroChina,” Deng Wenyuan, an analyst at Soochow Securities Co., said by phone. “Also, these two stocks reached their lows recently and had fallen a lot, so a technical rebound shouldn’t be surprising.”
Trading volumes for both PetroChina and ICBC peaked in the final 10 minutes and gains in the two stocks accounted for about 40 percent of the Shanghai index’s advance, according to data compiled by Bloomberg. The shares dropped out of the ranks of the world’s 10 biggest companies by market value this month, leaving China without any stocks in the grouping for the first time since 2006.
The Shanghai measure slumped 14 percent this month, capping the biggest monthly loss since August 2009, amid concern higher capital costs will curb economic growth as money-market rates jumped to records.
Central bank governor Zhou Xiaochuan said today the government will maintain market stability and adjust policies at the right time, his first comments since a record cash squeeze.
The People’s Bank of China “will use all kinds of tools to appropriately adjust liquidity in the market and maintain the overall stability of the market,” Zhou said at a speech at the annual Lujiazui Forum financial conference in Shanghai.
The Shanghai Composite’s property index surged 4 percent, its biggest gain since Feb. 5. China may ease financing for companies with property businesses, the 21st Century Business Herald reported today. The government has banned developers from issuing new shares, share placements and restructuring since at least 2008, said Dai Fang, a Shanghai-based property analyst at Zheshang Securities Co.
Vanke jumped 8.4 percent to 9.85 yuan. Poly Real Estate added 6.2 percent to 9.91 yuan. China Merchants Property Development Co. climbed 6.8 percent to 24.28 yuan.
“There’s speculation that developers will be allowed to sell new shares or bonds for refinancing,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “The purpose is probably to prevent developers from suffering from a credit crunch and to stabilize the economy.”
A measure of financial stocks in the CSI 300 including banks and developers climbed 3.8 percent today, the most among the 10 industry groups. China Merchants Bank Co. rose 6.2 percent to 11.60 yuan. China Minsheng Banking Corp., the nation’s first privately owned bank, added 4.4 percent to 8.57 yuan. Shanghai Pudong Development Bank Co. climbed 5.1 percent to 8.28 yuan.
Even with today’s gain for the financial index, it’s still down 17 percent this month on concern higher money-money rates will increase funding costs for banks. The seven-day repurchase rate reached a record 12.45 percent on June 20. It fell 58 basis points today to 6.16 percent, taking this week’s slide to 309 basis points, the most since February 2011, according to a weighted average compiled by the National Interbank Funding Center.
The Shanghai Composite has fallen 19 percent from this year’s high on Feb. 6 while the CSI 300 has slumped 21 percent in that period. The Shanghai index is valued at 8.1 times projected 12-month earnings, compared with the seven-year average of 15.1 times, according to data compiled by Bloomberg.
Trading volumes in the Shanghai Composite were 0.7 percent lower than the 30-day average today, while 30-day volatility was at 23.1, the highest level since April 2, according to data compiled by Bloomberg. The index’s 14-day relative strength measure, measuring how rapidly prices have advanced or dropped during a specified time period, was at 23.2 today. Readings below 30 indicate it may be poised to rise.
The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 1.2 percent in New York yesterday after valuations dropped to a 10-month low.
Sinovel Wind Group Co., the country’s biggest maker of wind turbines, fell 5 percent to 3.81 yuan for a ninth day of losses after the company was charged by U.S. prosecutors with stealing trade secrets. Wang Wen, a Beijing-based spokeswoman at Sinovel, declined to comment.
The National Bureau of Statistics is scheduled to release its manufacturing index for this month on July 1. The gauge may fall to 50 from 50.8 a month earlier, according to the median estimates of 28 analysts surveyed by Bloomberg. The number of 50 is the dividing line between expansion and contraction.