China's Stocks Climb Most This Month as Commodity Shares Advance

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China Data: Is There Light at the End of the Tunnel?
  • Monthly gain in producer prices is sign of recovery: JK Life
  • CSRC says it's planning to ease risk-management curbs

China’s stocks rose the most this month, led by commodity producers and financial companies, amid signs of a pick-up in industrial demand.

The Shanghai Composite Index climbed 1.6 percent, with a gauge of materials shares closing at a three-month high. The nation’s producer prices increased 0.5 percent last month from February, the first gain since September 2013, official data showed Monday. Inflation was 2.3 percent in March versus a year earlier, unchanged from the previous month’s gain.

The increase in producer prices adds to evidence of a stabilization in the world’s second-biggest economy, including central bank data released last week showing an unexpected rise in foreign-exchange reserves. China also announced plans late Friday to ease risk-management curbs on brokerages in the latest sign that regulators are gradually normalizing policy measures since last summer’s $5 trillion stock-market rout.

“The producer-price index number has delivered a signal that the economy is picking up and the consumer-price index is also acceptable as long as it doesn’t accelerate too fast,” said Wu Kan, a fund manager at JK Life Insurance in Shanghai. He said the China Securities Regulatory Commission’s plans to reduce the net capital ratio for brokerages would be positive for equities.

The Shanghai Composite closed at 3,033.96, after declining 0.8 percent last week, while the CSI 300 Index added 1.4 percent. Hong Kong’s Hang Seng China Enterprises Index advanced 1.2 percent and the Hang Seng Index rose 0.4 percent for a fourth day of gains, the longest winning streak since December.

Steelmakers led commodity producers higher, with a sub-index of material stocks jumping 2.5 percent as the biggest gainer among the CSI 300’s industry groups. Wuhan Iron & Steel Co. and Xiamen Tungsten Co. both rose by the 10 percent daily limit, while Baoshan Iron & Steel Co. climbed 6.4 percent.

Producer price declines narrowed to 4.3 percent year-on-year from a drop of 4.9 percent in February. Food prices jumped 7.6 percent. While some price gains may be seasonal and therefore temporary, a property recovery and rebound in commodity prices suggests the worst of the deflation threat may be in the past.

Brokerage Shares

The CSRC’s move to ease curbs on brokerages comes amid a rebound in the Shanghai Composite, which jumped 12 percent in March, halting two months of declines. The easing will release funds for brokerages to develop capital-intensive businesses such as securities lending and margin financing that helped fuel the stock market bubble last year.

Under the proposed changes, the ratio of minimum net assets to debt at brokerages will be cut to 10 percent from 20 percent while the ratio of net capital to net assets will be lowered to 20 percent from 40 percent, Zhang Xiaojun, a CSRC spokesman, said Friday. Brokerages will only need to fulfill one leverage requirement in future from two previously, the spokesman said.

Sealand Securities Co. paced gains among brokerages on Monday, climbing 6.5 percent. Citic Securities Co. added 2.7 percent in Shanghai and Haitong Securities Co. advanced 2 percent.

— With assistance by Shidong Zhang

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