July 30 (Bloomberg) -- China’s stocks gained, with the Shanghai Composite Index rising from its biggest loss in eight months, as lenders climbed after the central bank damped speculation it will rein in bank lending.
The benchmark gauge advanced 1.7 percent to 3,321.56 at the close, after changing direction at least 10 times, as the People’s Bank of China affirmed a “moderately loose” monetary policy to support the nation’s economy. Industrial & Commercial Bank of China Ltd. and China Construction Bank Co., the nation’s two largest lenders, jumped more than 3 percent.
The Shanghai measure tumbled 5 percent yesterday amid concern the government will curb inflows into a market that had more than doubled from last year’s low. Beijing-based Caijing magazine reported yesterday on its Web site that the central bank may order lenders to set aside larger reserves.
“As long as the scenarios of economic recovery and ample liquidity don’t change, the upward trend on the market won’t be reversed,” said Chen Wenzhao, a strategist at China Merchants Securities Co. in Shanghai. “Given the recovery is still at an early stage, it’s unlikely the government will change its policies.”
The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, added 2.1 percent to 3,634.82. A gauge of 50 financial companies on the index climbed 3.1 percent, accounting for 60 percent of the CSI 300’s gains today.
In the second half of this year, the central bank will “emphasize the use of market tools instead of quantity controls to guide appropriate growth in money supply and lending growth,” said People’s Bank of China Deputy Governor Su Ning in Shanghai, according to a statement on its Web site.
Banks Rally
Industrial & Commercial Bank, the nation’s biggest listed lender, added 3.3 percent to 5.34 yuan. Construction Bank, the second largest, jumped 6 percent to 6.52 yuan. Shenzhen Development Bank Co., controlled by buyout firm TPG Inc., climbed the daily 10 percent limit to 26.18 yuan.
The Shanghai index is up 82 percent this year, the world’s second-best performer after Peru among 89 equity benchmark measures tracked by Bloomberg. Stocks surged after the government unveiled a 4 trillion yuan ($586 billion) stimulus package in November and dropped lending restrictions to cushion the economy from a record slump in exports.
China’s credit growth will slow from the “unsustainable” pace seen this year to about 15 percent in 2010 as a strengthening economy may reduce need for loan support, Goldman Sachs Group Inc. analysts led by Roy Ramos said in a note dated yesterday.
Broader Perspective
“The Chinese authorities are actually not very happy with the stock market moving up as quickly” as it has, Arnout van Rijn, chief investment officer of Robeco Hong Kong Ltd., said in a Bloomberg Television interview today. “They will think about things, how to put this into a broader perspective and take things more slowly.”
Loans worth about an estimated 1.16 trillion yuan were invested in the stock market in the first five months of this year, China Business News reported June 29, citing Wei Jianing, a deputy director at the macro-economics department of the Development and Research Center under China’s State Council.
Bank lending and government stimulus spending helped the nation’s GDP expand 7.9 percent in the second quarter, making it the first major economy to rebound from the global recession.
China’s economy is “gangbusters compared to the rest of the world, why would they try to kick that?” said Kenneth Fisher, who has about $900 million invested in Chinese shares among the $28 billion he manages as chief executive officer of Fisher Investments Inc. in Woodside, California. “They have zero incentive” to curb lending, he said.
Aluminum, Copper
Commodity producers gained on optimism loan growth will spur demand for metals. Aluminum Corp. of China Ltd., the nation’s biggest maker of the metal, jumped 4.9 percent to 18.16 yuan, snapping a two-day, 10 percent drop. Jiangxi Copper Co., the country’s largest copper producer, added 2.5 percent to 43.67 yuan. The stock’s more than quadrupled this year. I
Stocks on the Shanghai index trade at 35.9 times reported earnings, the highest since January 2008 and more than twice the average of emerging markets. The gauge slumped 65 percent in 2008 after doubling in 2006 and 2007.
Individual investors have rushed to buy equities as regulators lifted a nine-month moratorium on IPO share sales and the economic growth accelerated. More than a million stock accounts were opened in the two weeks to July 24, data from the nation’s clearing house showed, the most since January 2008.
Wu Ruiling, 70, a retired elementary school teacher, said yesterday’s slump cost her a paper loss of 30,000 yuan, paring the value of her investments to about 700,000 yuan. Wu owns 18 stocks including Wuhan Iron & Steel Co. and Huaxia Bank Co.
“I’m not afraid of the plunge and I wouldn’t sell my stock because the upward trend is still there and a correction like that is quite normal,” she said, sitting at an outlet of Shenyin & Wanguo Securities Co. in Shanghai’s Luijiazui financial district. “Stock programs on the TV and radio all said it’s a good opportunity to buy.”
