Stimulus Bets Stoke Longest Advance Since March: China Overnight
Chinese equities in the U.S. climbed for a fifth day, the longest stretch of gains since March, on prospects slowing inflation will allow policy makers to take further steps to stimulate the economy.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in New York climbed 0.7 percent to 95.39 yesterday, the highest close since May 14. Spreadtrum Communications Inc. (SPRD) rose to a one-month high after Credit Suisse Group AG said the mobile chipmaker was a good buy, and Youku Tudou Inc. (YOKU) had the strongest gain in three months. Huaneng (902) Power International Inc. traded at the highest premium to the Hong Kong share in two months as BNP Paribas SA upgraded the stock.
Chinese consumer prices rose 1.9 percent from a year earlier in September, an Oct. 15 government report showed, 10 basis points off the slowest pace in two years. The Bloomberg China-US gauge added 4.6 percent in September, the biggest monthly advance since February, on speculation China’s new leaders to be announced on Nov. 8 will build on this year’s reductions in interest rates and bank reserve ratios with further measures to stoke growth.
“Falling inflation will allow the government to take more stimulus measures,” Sam Mahtani, who oversees about $5 billion as director of emerging markets at F&C Asset Management Plc (FCAM), said by phone from London yesterday. “We expect stimulus will mainly come from cuts in reserve requirement ratios. Emerging- market stocks, including the Chinese, will see an uptrend in the next 12 months.”
China ETF Gains
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., gained 0.5 percent to a five- month high of $36.85. The Standard & Poor’s 500 Index (SPX) jumped 1 percent to 1,454.92. The MSCI Emerging Markets Index has added 9.5 percent in 2012.
The Shanghai Composite Index (SHCOMP) was little changed yesterday at 2,098.81. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong was also steady at 10,367.46, after reaching the highest level since May 8 a day earlier.
After betting on declines earlier in the year, Fortress Investment Group LLC (FIG) has turned bullish on China’s currency and equities as it predicts the government will halt a seven-quarter slowdown in the world’s second-largest economy, Adam Levinson, chief executive officer of the hedge fund’s Singapore unit, said in an interview yesterday.
China showed signs of “stabilization and modest improvement” last month and pro-growth measures are expected with the appointment of a new leadership in November, Levinson said in Singapore. Fortress manages $47.8 billion of assets globally.
Spreadtrum, a Shanghai-based maker of mobile phone chips, surged 4.2 percent to $21.74 in New York yesterday, the highest since Sept. 7. The advance was the biggest in two weeks.
Spreadtrum’s chips are “leading in ultra low-cost smartphones” and there is an “attractive opportunity at reasonable valuations,” Credit Suisse analyst Randy Abrams wrote in a note dated Oct. 15. Abrams maintained a rating equivalent to buy on the company, with a price target of $26.50.
Huaneng Power, China’s largest electricity producer, climbed 2.8 percent to $29.64, the biggest one-day gain since Sept. 27. Its American depositary receipts, each representing 40 underlying shares, traded 0.6 percent above its Hong Kong stock, the widest premium in two months.
BNP Paribas analyst Daisy Zhang raised her recommendation on the stock to buy from hold yesterday, citing declining fuel costs. She also lifted the price target for the company’s Hong Kong-traded stock to HK$7.10 ($0.92) from HK$5.66. Huaneng gained 2.7 percent yesterday in Hong Kong trading to HK$5.71.
Youku, the most-popular video website operator in China, increased 4.6 percent to $20.94, the strongest level since June 29.
Visits to the website of Tudou, which was acquired by Youku in August, rose to 2.75 billion in the week ended Sept. 23, 2.5 times the traffic volume on the video website of Shenzhen-based Tencent Holdings Ltd., the China Securities Journal reported yesterday, citing data from Iresearch, which tracks Internet user volumes. Tencent is China’s largest Internet company.
PetroChina Co., the country’s biggest oil producer, climbed for a second day, adding 2 percent to $138.52, the highest level since May 8.
PetroChina and Royal Dutch Shell Plc successfully conducted trial drilling on their first joint shale gas well on Sept. 27, Beijing-based PetroChina’s parent, China National Petroleum Corp., said in its online newsletter yesterday. The well is located in Sichuan province.
GDP, Output Data
Melco Crown Entertainment Ltd. (MPEL), which runs casinos in Macau, gained 1.4 percent to a five-month high of $14.22 yesterday in New York. The company’s ADRs have traded at a premium to Hong Kong each day since Oct. 9.
China’s economy probably expanded 7.4 percent in the three months ended Sept. 30, from 7.6 percent in the previous quarter, the median estimate of 43 analysts in a Bloomberg survey shows. Industrial output last month rose 9 percent from a year earlier, compared with a three-year low of 8.9 percent in August, according to analysts’ forecast. China’s statistics bureau is set to release the data tomorrow.
“China’s manufacturing sector has turned,” Steven Bell, who manages $600 million in assets as principal portfolio manager at the GLC Ltd., a London-based hedge fund, said by phone yesterday. “We’ll see stronger September industrial production figures this week.”
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