China’s Stocks Rise as European Debt Concerns Ease, Trimming Weekly Drop
China’s benchmark stock index rose, trimming a weekly loss, after foreign direct investment climbed and the European Central Bank and international policy makers coordinated to lend dollars to banks to tame the credit crisis.
China Minsheng Banking Corp. rose 0.9 percent after Shanghai Securities News reported the regulator may allow lenders to conduct asset securitization to ease liquidity. Southwest Securities Co. advanced 1.4 percent after saying it will buy a stake in a fund management firm. Poly Real Estate Group Co., China’s second-largest developer by market value, fell for the first time in five days on a newspaper report Shanghai’s new-home inventories reached a record.
“The risk of a short-term default in the euro region looks low after cash injections from global central banks,” said Dai Ming, fund manager at Shanghai Kingsun Investment Management & Consulting Co. “The magnitude of the rebound may be limited as you see no signs of policy loosening in China.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, added 3.29 points, or 0.1 percent, to 2,482.34 at the 3 p.m. close. It retreated 0.6 percent this week, capping a third weekly loss. The CSI 300 Index (SHSZ300) climbed 0.2 percent to 2,733.99 today.
The Shanghai gauge has slumped 12 percent this year, extending last year’s 14 percent plunge, as the government took steps to cool inflation that’s at an almost three-year high. The stock gauge is valued at 11.4 times estimated profit, the lowest on record, according to weekly data compiled by Bloomberg dating back to January 2006.
Foreign direct investment in China climbed 11.1 percent from a year earlier to $8.45 billion in August, the Ministry of Commerce said in a statement on its website yesterday.
Investment from overseas totaled $8.45 billion last month, after expanding 19.8 percent in July, the Ministry of Commerce said in a statement on its website yesterday. For the first eight months, investment rose 17.7 percent to $77.63 billion.
“China remains the only bright spot amid the global financial turmoil,” Li Huiyong, a Shanghai-based economist with Shenyin & Wanguo Securities Co., said yesterday. “Investment returns in China remain high and local authorities are keen to attract funds for new businesses,” he said.
The European Central Bank said it coordinated with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank to extend three-month loans to euro-area banks in an effort to ensure they have enough cash for the rest of the year. The announcement added to optimism that policy makers were containing the European sovereign-debt crisis after the leaders of France and Germany confirmed they will support Greece’s continued participation in the shared euro currency.
Minsheng Banking, the nation’s first privately owned bank, gained 0.9 percent to 5.82 yuan. Shenzhen Development Bank Co. (000001) climbed 2.7 percent to 17 yuan. China Everbright Bank Co. added 1 percent to 3.07 yuan.
The asset securitization may help banks reduce liquidity pressure, Shanghai Securities News said, citing Yan Qingmin, assistant chairman of the China Banking Regulatory Commission.
Chinese stocks in Shanghai and Hong Kong may rally 15 percent over the next 12 months as equity prices track profit growth, said Patrick Ho, the head of Greater China equities at BNP Paribas Investment Partners.
Ho, whose company oversees about $740 billion, is buying shares of companies that will help manage China’s growing wealth, such as brokerages and financial services. BNP is also bullish on companies that will profit from increased consumption in China including mobile telephone providers.
Southwest Securities gained 1.4 percent to 11.30 yuan. The brokerage said it will pay 1.18 billion yuan ($185 million) to buy a 20 percent stake in Yinhua Fund Management Co.
China needs to keep monetary policy tight as the risk of inflation still exists, International Monetary Fund Deputy Managing Director Zhu Min said at the World Economic Forum in the northeastern Chinese city of Dalian yesterday. Inflation will be a long-term phenomenon, he said.
Poly Real Estate lost 1.2 percent to 10.84 yuan. China Vanke Co., the nation’s biggest listed property developer, retreated 0.4 percent to 8.06 yuan. China Merchants Property Development Co. fell 1.7 percent to 18.82 yuan.
Shanghai’s new-home inventories are at a record 8.16 million square meters, taking developers more than 15 months to dispose of the entire stock at the current sales pace, the Shanghai Daily said, citing the city’s official real estate website and real estate agents.
China’s Subprime Crisis
China has expanded its property control measures this year, raising down-payment requirements and mortgage rates to slow gains in home prices. The government said in July it will rein in prices in smaller cities after limiting home purchases in markets such as Beijing and Shanghai.
Borrowing by thousands of companies set up by China’s local governments to fund construction is the nation’s equivalent of the U.S. subprime mortgage crisis, said Cheng Siwei, a former deputy head of the country’s top legislative body.
“Our version of the U.S. subprime crisis is the lending to local governments, which is causing defaults,” Cheng said at the World Economic Forum in the Chinese city of Dalian today. He served as vice chairman of the standing committee of the National People’s Congress from 1998 to 2003.
--Zhang Shidong. Editors: Allen Wan, Richard Frost
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