Chinese Stocks Rise as Bank Reserve-Ratio Cuts ApprovedWeiyi Lim
Chinese stocks rose, sending the Shanghai Composite Index to a two-month high, after the central bank expanded the number of lenders eligible for cuts to their reserve-requirement ratios.
China Minsheng Banking Corp. surged at least 1.7 percent in Hong Kong and Shanghai while Industrial Bank Co. climbed 1.6 percent after confirming they had received permission from the People’s Bank of China to set aside fewer funds against deposits. Wintime Energy Co. and China Oilfield Services Ltd. gained after Xinhua News Agency cited President Xi Jinping as saying China should push for energy conservation and boost its alternative energy supply.
The Shanghai Composite rose 0.7 percent to 2,085.98 at the close. The Hang Seng China Enterprises Index in Hong Kong added 0.1 percent to 10,522.13. Mainland policy makers have taken measures such as lowering reserve requirements and accelerating public spending to shore up China’s economy after it expanded at the slowest pace in six quarters for the January-March period.
“This is another step in releasing more funds, creating lending,” Evan Lucas, a market strategist at IG Ltd. said today in Singapore. “It’s a step in the right direction.”
Hong Kong’s Hang Seng Index retreated 0.1 percent. The CSI 300 Index advanced 0.7 percent at the close. The Bloomberg China-US Equity Index slid less than 0.1 percent on June 13.
The PBOC said it would reduce the reserve-requirement ratio by half a percentage point for most city commercial banks, non-county level rural commercial lenders and rural cooperatives from today, according to a statement posted on its website last week. China Minsheng, China Merchants Bank Co. and Industrial Bank had not been among those eligible.
China Minsheng, the nation’s first privately owned bank, rose 1.7 percent in Hong Kong and gained 3.1 percent in Shanghai. Industrial Bank advanced 1.6 percent. China Merchants, which had yet to confirm the cut, climbed 1.6 percent in Hong Kong and 1.7 percent in Shanghai. China International Capital Corp. wrote in a report that a half-percentage point cut by China Merchants was accurate.
“The targeted easing over the past two months has kept a floor under growth and assuaged investors’ concerns about a hard landing,” Michelle Gibley, director of international research at San Francisco-based Charles Schwab Corp., which oversees about $2.35 trillion in assets, said by e-mail on June 13. “Chinese stocks are pricing in a lot of bad news and we believe the risk/reward is favorable for owning Chinese stocks over the next 6-12 months.”
The Shanghai gauge climbed 2 percent last week as data showed industrial output data and retail sales grew in May, overshadowing a slump in the property industry as sales and construction dropped. The rally through today pared this year’s loss to 1.4 percent.
China will build more million-kilowatt coal-fired power stations for long-distance electricity transmission and phase out coal plants that fail to meet environmental standards, President Xi said, according to Xinhua. The nation will start to introduce new nuclear reactor projects on its east coast as soon as possible, Xi said.
Wintime Energy Co. surged 3.4 percent, leading gains on the CSI 300 energy index. China Oilfield Services Ltd. rose 2.6 percent in Shanghai.
Suzhou Electrical Apparatus Science Academy Co., which tests alternative-energy equipment, surged 6.4 percent, the second-most among stocks on the ChiNext gauge of smaller companies.
Oil climbed today, with West Texas Intermediate extending a 4.1 percent weekly gain, as the escalation of violence in Iraq stoked concern crude supplies will be disrupted. The army killed more than 279 rebels yesterday in Iraq, OPEC’s second-largest producer, as the prospect of civil war intensifies with Sunni Muslim insurgents controlling territory north of Baghdad.
PetroChina Co., the nation’s largest oil and gas producer, rose 1 percent in Hong Kong and 0.9 percent in Shanghai. Air China Ltd. dropped 1.1 percent in Hong Kong amid concern higher fuel costs will hurt earnings.
“Markets have reacted with movements in crude and in precious metals prices, some selling out of equities into bonds,” Toby Lawson, Sydney-based head of futures, options and cash equities trading for Asia Pacific at Newedge Group SA, said in a Bloomberg TV interview. “That’s pretty normal when you see some escalation of geopolitical shocks to markets.”
Futures on the Standard & Poor’s 500 Index fell 0.3 percent. U.S. stocks slid last week as lower estimates for global growth and the threat of civil war in Iraq halted a three-week rally that had sent equity indexes to all-time highs.
Jewelry retailer King Fook Holdings Ltd. jumped 45 percent to HK$1.07 cents after saying its controlling stakeholder was approached by potential investors.