China’s Stocks Rise as Bank Share Buying Overshadows IPO Concern

Chinese stocks rose after a unit of nation’s sovereign wealth fund boosted its stakes in the biggest lenders, overshadowing concern regulators will resume approving initial public offerings next month.

Industrial & Commercial Bank of China Ltd. climbed 1 percent after Central Huijin Investment Ltd. bought shares of the biggest lender. Ping An Bank Co. jumped 2.6 percent and Gree Electric Appliances Inc. led gains for consumer companies after the China Securities Journal reported the central bank may cut interest rates and Credit Agricole SA forecast a cut in banks’ reserve-requirement ratios. China Vanke Co., the largest developer, advanced 1.1 percent after data showed property prices rising at the fastest pace in more than two years.

The Shanghai Composite Index added 0.1 percent to 2,159.29 at the close. The CSI 300 Index climbed 0.6 percent to 2,418.75. The Hang Seng China Enterprises Index slid 0.3 percent. The Bloomberg China-US Equity Index jumped 1.9 percent yesterday.

“There’s a rumor the central bank will reduce interest rates and the reserve-ratio requirement,” Zhang Gang, a strategist at Central China Securities Holdings Co. in Shanghai, said by phone. “This is pure speculation, so the drive is not that strong. Even if we do have rate cuts, it typically takes two rounds before there’s a positive impact on the economy and we have the added pressure of new IPOs.”

The Shanghai Composite has slumped 11 percent from this year’s high on Feb. 6 on concern about slowing economic growth, tighter liquidity and that IPOs will restart after being suspended since October. China will probably resume approving IPOs from the end of July, Reuters reported today, citing unidentified sources present at a meeting of China Securities Regulatory Commission Vice Chairman Yao Gang and brokerages.

Rate Outlook

The Shanghai index trades at 8.9 times 12-month estimated earnings, compared with the three-year average of 10.8, data compiled by Bloomberg showed. Its 30-day volatility was at 15.3, compared with this year’s average of 19.1. Trading volumes were 30 percent below the 30-day moving average today and were the fourth lowest this year, data showed.

The central bank may cut borrowing costs, the China Securities Journal cited Liu Yuhui, a researcher at the Chinese Academy of Social Sciences, as saying.

Ping An Bank led gains for lenders, advancing 2.6 percent to 19.73 yuan. Industrial Bank Co. added 1.9 percent to 16.64 yuan. ICBC rose 1 percent to 4.16 yuan. Central Huijin increased its stake in the four biggest lenders last week. China Construction Bank Corp., the second-largest lender, advanced 0.4 percent to 4.65 yuan.

Gree Electric, the largest maker of home air-conditioners, rose 5.5 percent to 25.31 yuan. Great Wall Motor Co. paced an advance for automakers with a 6.4 percent gain to 35.10 yuan.

Liquidity Tightens

China Vanke paced gains for developers, rising 1.1 percent to 10.44 yuan. Rival Poly Real Estate Co. climbed 1.4 percent to 11.12 yuan. Chinese home prices climbed from a year earlier in 69 of the 70 cities tracked by the government, the National Bureau of Statistics said in a statement today. The southern business city of Guangzhou posted the biggest gain with prices rising 15 percent from a year earlier. Beijing prices climbed 12 percent, while they advanced 10 percent in Shanghai.

China’s one-year interest-rate swap rates, the fixed cost needed to receive the floating seven-day repurchase rate, reached 3.90 percent today, the highest level since September 2011, according to data compiled by Bloomberg.

The People’s Bank of China didn’t auction repurchase agreements or reverse-repurchase agreements today, according to a trader at a primary dealer required to bid at the sales.

Economic Slowdown

“The PBOC has continued to surprise with its refusal to inject liquidity through open-market operations despite extremely high money market rates,” Dariusz Kowalczyk, a Credit Agricole CIB strategist in Hong Kong, wrote in a report today. “The situation is untenable and we expect the central bank to inject liquidity in the near term either via reverse repos or a cut in the require reserve ratio.”

Interbank market liquidity may continue to be tight until the beginning of July, according to a commentary in the China Securities Journal. The seven-day repurchase rate, a gauge of interbank funding availability, has averaged 6.03 percent in June, the most since the National Interbank Funding Center began compiling a weighted average in 2006.

Foreign direct investment increased 0.3 percent from a year earlier to $9.26 billion, the Ministry of Commerce said today in a statement in Beijing, after a 0.4 percent gain in April. China’s outbound investment rose 20 percent in the first five months of the year to $34.3 billion, compared with a 27.4 percent pace in January-April.

The report follows data indicating capital inflows slowed last month while growth decelerated in exports, industrial production and lending. Confidence is fading in an economic rebound this quarter, with investment banks from Morgan Stanley to Barclays Plc cutting their 2013 expansion forecasts.

Jiangxi Copper, the biggest producer of the metal, lost 1.2 percent to 18.70 yuan. Baoshan Iron & Steel Co., the listed unit of China’s second-biggest steelmaker, slumped 1 percent to 4.33 yuan.

-- Editors: Allen Wan, Richard Frost

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