China’s Stocks Rebound on Interest-Rate Speculation, Fed Pledge
China’s stocks rebounded from a more than one-year low on speculation the government may delay interest-rate increases after Premier Wen Jiabao urged global cooperation to stabilize financial markets.
Industrial & Commercial Bank of China Ltd. paced gains by lenders. PetroChina Co. led commodity producers higher as crude and metal prices rallied after the U.S. Federal Reserve vowed to keep borrowing costs near zero. China Shipping Development Co. advanced 1.7 percent after a government report showed July exports rose more than economists’ expected.
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, climbed 23.11, or 0.9 percent, to 2,549.18 at the 3 p.m. close. The gauge closed yesterday at a level that was 20 percent lower than a November high. The measure trades at 11.7 times estimated earnings, a record-low, according to weekly data compiled by Bloomberg.
“We’re unlikely to see another interest rate this year as inflation is about to peak and the global economy is fragile,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “The A-share market is at a bottom and the valuations for companies like developers and consumer retailers are low.”
The CSI 300 Index advanced 0.9 percent to 2,824.12, paring its loss this year to 9.7 percent.
China’s State Council said “relevant nations” should adopt responsible fiscal and monetary policies to maintain investors’ confidence, according to a statement yesterday after a meeting chaired by Premier Wen.
The State Council’s statement dropped previous language describing the fight against inflation as the nation’s top priority and policy makers are likely in a “wait-and-see mode,” Lu Ting, a Hong Kong-based economist at Bank of America Merrill Lynch, wrote in an e-mailed note.
The People’s Bank of China will leave borrowing costs unchanged for the rest of this year, according to eight of 10 analysts surveyed yesterday.
ICBC advanced 1.2 percent to 4.15 yuan. Bank of China Ltd. added 0.3 percent to 2.95 yuan. China Vanke Co., the nation’s biggest developer by market value, climbed 1.7 percent to 8.44 yuan.
The central bank has raised interest rates five times and ordered lenders to set aside more cash as deposit reserves 12 times since the start of 2010 to contain price rises, which quickened to the fastest pace in three years in June.
Consumer prices are in a “controllable range,” the National Development and Reform Commission said. Government measures to slow inflation has had preliminary effects, it said.
Consumer prices climbed 6.5 percent in July from a year earlier, the fastest pace since 2008, a report from the Beijing- based National Bureau of Statistics showed yesterday. That was more than the 6.4 percent median estimate in a Bloomberg News survey. A slower-than-estimated 14 percent gain in industrial production added to signs that moderating economic growth may assist in limiting price pressures.
PetroChina climbed 0.9 percent to 9.85 yuan. China Petroleum & Chemical Corp. (600028) added 0.7 percent to 7.10 yuan. Jiangxi Copper Co., the nation’s largest producer of the metal, advanced 0.5 percent to 33.17 yuan.
Crude for September delivery advanced as much as $3.13, or 4 percent, to $82.43 a barrel in electronic trading on the New York Mercantile Exchange. Copper for three-month delivery climbed as much as 3.1 percent to $9,005 per metric ton on the London Metal Exchange.
The U.S. Federal Reserve pledged yesterday to keep interest rates near zero through mid-2013. The Fed also discussed a range of policy tools to bolster the economy, saying it is prepared to use them “as appropriate.” Evidence that policy makers are taking steps to spur growth and restore investor confidence helped global equity markets snap a nine-day rout that had wiped out $7.8 trillion in value.
’Hot Money’ Concern
The U.S. will likely adopt a third round of quantitative easing, which would increase global imported inflationary pressure and cause more “hot money” inflows to China, the NDRC said.
China Shipping Development gained 1.7 percent to 7.11 yuan. China Merchants Energy Shipping Co. added 1.2 percent to 3.33 yuan, the most since July 4.
Outbound shipments rose 20.4 percent from a year earlier compared with the 17 percent median forecast in a Bloomberg News survey of 25 economists. Imports climbed 22.9 percent, the customs bureau said on its website today. The $31.5 billion surplus exceeded a median forecast of $27.4 billion.
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