China Stocks Rise Most in Week; Consumer, Chongqing Shares Jump
China’s stocks rose, driving the benchmark index’s biggest gains in more than a week, after the central bank injected record funds into the financial system and on speculation more cities will roll out stimulus plans.
Port operator Chongqing Ganjiu Co. surged 10 percent and Chongqing Road & Bridge Co. (600106) jumped 6.1 percent after the Xinhua News Agency said Chongqing municipality plans to boost industrial investment. Liquor maker Kweichow Moutai Co. led a rally for consumer companies after the Economic Information Daily reported China may issue new policies to boost consumption. China Vanke Co.’s B shares climbed after the developer confirmed a Securities Times report it will consider listing in Hong Kong by converting its B shares to H shares.
The Shanghai Composite Index (SHCOMP) gained 0.5 percent to 2,118.27 at the close, the biggest advance since Aug. 9. The CSI 300 Index (SHSZ300) added 0.5 percent to 2,313.70. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong rose 0.2 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, fell 0.6 percent in New York.
“There are still hopes for rate cuts and stimulus measures,” said Wu Kan, Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Still, this rebound may be short-lived as there are still concerns about earnings.”
The Shanghai Composite has fallen 14 percent from this year’s high on March 2 amid concern the economic slowdown is worsening. The gauge is valued at 9.5 times estimated profit, compared with the 17.5 average since Bloomberg began compiling the data in 2006.
The Shanghai Composite fell yesterday to the lowest level this month on concern the government will hold off from easing monetary policy after real-estate prices rose in the largest number of cities in 14 months. Policy makers cut interest rates in June and July after two reductions in reserve-requirement ratios for lenders this year as the economy expanded at the slowest pace since 2009.
The nation’s interest-rate swaps fell from a three-month high as the central bank injected record funds into the financial system to ease a cash crunch.
The central bank stepped up reverse-repurchase operations today, injecting 150 billion yuan using seven-day contracts and a further 70 billion yuan via 14-day agreements, according to a trader at a primary dealer required to bid at the auctions. That’s the biggest one-day injection since the current round of reverse repos started in late June.
The People’s Bank of China has no intention of further lowering reserve requirements in the short term and will instead favor money-market operations to meet funding needs, according to an Aug. 18 commentary in the Financial News, a newspaper controlled by the monetary authority.
A gauge of consumer-staples producers in the CSI 300 jumped 1.6 percent. Kweichow Moutai, the biggest producer of baijiu liquor, climbed 1.4 percent to 235.79 yuan. Wuliangye Yibin Co., the second-largest baijiu producer, jumped for a second day, rising 1.3 percent to 35.30 yuan. Wuliangye reported a 50 percent jump in first-half profit on Aug. 19.
China may issue new policies to boost consumption this year, the Economic Information Daily reported today, citing an unidentified person as saying. The government is seeking to transform its economy into one driven by consumption rather than exports and investment.
The Ministry of Commerce and Ministry of Industry and Information Technology are assessing the feasibility and effects of the possible stimulus plans, the newspaper said.
Chongqing plans to boost industrial investment to 1.5 trillion yuan ($235.9 billion) in the five years through 2015, Xinhua said today, citing the local government. The investment will help Chongqing expand its total industrial output beyond 3 trillion yuan, the report said.
Chongqing’s industrial investment plan will focus on building seven “big manufacturing industries,” including electronic information, automotive, equipment and parts manufacturing, oil refining, material and energy industries, according to Xinhua.
“Chongqing is not the first city to announce investment plans,” Zhang Zhiwei, China economist at Nomura Holdings Inc., said in a note. “Ningbo, Nanjing, Guangzhou and Changsha have all announced plans to promote investment and growth. We continue to expect these city-level initiatives to help the economy to rebound in the second half.”
Chongqing Gangjiu jumped by the daily limit of 10 percent to 7.26 yuan, the most since April 6. Chongqing Road surged 6.1 percent to 4.53 yuan.
Chongqing is the city where Bo Xilai was party secretary until he was suspended from the Politburo in April on allegations of violating party discipline. A court in Hefei city gave his wife, Gu Kailai, the death penalty with a two-year reprieve yesterday for the murder of British businessmen Neil Heywood, a punishment that is commonly reduced to life imprisonment in China.
China Vanke’s B shares jumped 1.6 percent to HK$9.65. The biggest-listed Chinese property developer confirmed a Securities Times report that it will consider listing in Hong Kong by converting its B shares traded in Shenzhen to H shares.
“Converting B shares to H shares would be positive for the company as it will give them better conditions for financing from overseas capital,” said Jinsong Du, a Credit Suisse Group AG property analyst. Vanke has no detailed plans, the developer said in a statement today.
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