Chinese stocks trading in New York rose the most in three months, led by Internet companies from Baidu Inc. to Qihoo 360 Technology Co., on speculation lending reforms will strengthen the financial system and boost markets.
The Bloomberg index of the most-traded Chinese shares in the U.S. climbed 2.4 percent to 101.14, the biggest advance since Feb. 11. Baidu, operator of China’s largest Internet search engine, jumped the most in a month. Qihoo, which owns the second-biggest search engine, surged 8.1 percent, rebounding from a 12 percent tumble last week.
China is drafting rules to help manage any bank failure, two people familiar with the matter said. Authorities extended their campaign to tame a credit boom after President Xi Jinping said the nation needs to adapt to a “new normal” while policy makers focus on changing the structure of the economy. Fidelity Worldwide Investment, a non-U.S. affiliate of Fidelity Investments, will increase coverage of shares traded in Shanghai as the market becomes more transparent, Leon Tucker, head of equity research for Asia Pacific, said yesterday.
“We’re seeing a reaction to the news coming out of China, the reforms they’re focused on, what they’re doing to move the economy forward, to modernize the economy, make it more market oriented,” Wayne Lin, a money manager at Baltimore-based Legg Mason Inc., which oversees $673 billion, said by phone. “It shows the Chinese government realizes the risk there.”
The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., added 2.1 percent to $35.32 while the Standard & Poor’s 500 Index climbed 1 percent to an all-time high as Internet and small-cap shares rose. The Dow Jones Industrial Average also closed at a record.
The Shanghai Composite Index slipped 0.3 percent at 2:07 p.m. local time after China’s industrial-output, investment and retail-sales growth unexpectedly slowed.
The People’s Bank of China and the China Banking Regulatory Commission are working on a plan to ensure the safety of deposits and an orderly repayment of financial firms’ liabilities in the event of a crisis, two people said, asking not to be identified because the draft rules haven’t been made public.
China’s State Council, the country’s cabinet, said last week it will deepen reforms to improve the quality of and access to the nation’s stock, bond and commodities markets. including relaxing limits on foreign investment in listed companies.
China’s growth fundamentals haven’t changed and the country is still in a “significant period of strategic opportunity,” Xi said, according to a Xinhua News Agency report on the central government website on May 10. Still, the government must prevent risks and take “timely countermeasures to reduce potential negative effects,” he said.
China’s broadest measure of new credit declined in April as authorities extended their campaign to tame financial dangers. Soured loans have climbed to the highest level since September 2008 as a slowing economy and a government crackdown on shadow financing, where loans are extended outside the formal banking system, make it harder for borrowers to repay debt.
“If you think about what the biggest event risk that investors are concerned about with China is, they’re most concerned about the shadow banking system,” Lin said.
Shadow finance, estimated at 46.7 trillion yuan ($7.5 trillion) by JPMorgan Chase & Co., should be subjected to tougher rules as its unchecked growth has helped drive up borrowing costs and threatens to undermine the financial system, Liu Shiyu, deputy governor of the People’s Bank of China, said on May 10.
American depositary receipts of Baidu surged 4.6 percent to $159.88, the biggest gain since April 8. Qihoo, based in Beijing, soared to a one-week high of $83.98.
ADRs of 21Vianet Group Inc., China’s largest independent web data-center operator, jumped 13 percent to $26.13. The stock had tumbled 16 percent in April.