China's Stock Futures Rise on Policy Outlook, US Economic Data - Businessweek

China’s stock-index futures rose as investors speculated the government will introduce fiscal policies to spur growth and an improving outlook for the U.S. economy bolstered optimism Chinese exports won’t collapse.

Futures on the CSI 300 Index (SHSZ300) expiring in July, the most active contract, gained 0.3 percent to 2,462.60 as of 9:19 a.m. local time. The Shanghai Composite Index (SHCOMP) dropped 5.13 points, or 0.2 percent, to 2,216.93 yesterday. The CSI 300 Index declined 0.3 percent to 2,477.20. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 1.1 percent in New York.

“The U.S. economic data are helping to reverse the overly pessimistic sentiment here and that may ease concern about deteriorating export growth,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Stocks may be stuck in a tight range here because of low valuations and expectations oof additional pro-growth measures.”

The MSCI Asia Pacific Index (MXAP) rose 0.8 percent today as concern eased the U.S. economy is faltering. The index of pending home resales climbed 5.9 percent after a 5.5 percent decline in April, the National Association of Realtors reported. Economists forecast a 1.5 percent gain.

Orders for durable goods climbed more than forecast in May easing concern that U.S. manufacturing is faltering. Bookings rose 1.1 percent, a Commerce Department report showed. The median forecast of economists surveyed by Bloomberg News called for a 0.5 percent gain.

The U.S. is China’s second-largest export market, accounting for about 17 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.

Fiscal Steps

About 5.1 billion shares changed hands in the Shanghai Composite yesterday, 41 percent lower than the daily average this year. Thirty-day volatility in the gauge was at 15.71, compared with this year’s average of 18.35.

The Shanghai Composite has fallen 6.5 percent in June, poised for the worst monthly performance since March, on concern the first interest-rate cut since 2008 won’t be enough to prevent economic growth from missing the government’s target of 7.5 percent this year. Stocks in the measure are valued at 9.69 times estimated earnings, compared with the average of 17.6 since Bloomberg began compiling the data in 2006.

Economic data this weekend may show China’s manufacturing is contracting. The Purchasing Managers’ Index compiled by the statistics bureau and logistics federation may drop to 49.8 this month, falling below the dividing line of 50 for expansion and contraction, according to the median estimate of 19 economists in a Bloomberg survey. The figure is due July 1.

Reserve Ratio

Chinese preferential tax policies for corporate pension and pension insurance may be released this year, the China Securities Journal reported today, citing unidentified people. The policy may be in the form of delayed taxation on the pension funds to reduce the amount of tax paid, it said.

Bank of America expects China’s central bank to cut lenders’ reserve requirement ratio “in weeks,” economist Lu Ting wrote in a note yesterday. The government may lower the reserve ratio three more times from now until the year-end to stabilize economic growth, Lu wrote.

Chinese stocks traded in New York rose for a second day, as Giant Interactive Group Inc. surged the most since April, on prospects the government will take steps to shore up flagging growth in Asia’s largest economy.

The Bloomberg China-US Equity Index of the most-traded Chinese companies in New York added 1.1 percent to 89.95 at the close of trading in New York. Online game developer Giant Interactive advanced 6 percent and software developer VanceInfo Technologies Inc. climbed the most since February. Melco Crown Entertainment Ltd. rose for the first time in three days after the Philippines’ Belle Corp. said it’s in talks with the Macau casino operator to set up a gambling complex in Manila.

Earnings Concerns

China may introduce “more proactive” policies to ensure stable growth, the state-owned China Securities Journal said in a commentary published yesterday. Daiwa Securities Group Inc. and HSBC Holdings Plc cut their annual growth outlooks as manufacturing may have contracted for an eighth month. Companies on the Bloomberg China-US Index that reported earnings from Feb. 15 to May 16 missed analysts’ estimates by 19 percent, according to data compiled by Bloomberg.

“The biggest negative right now for Chinese stocks is that earnings are being cut,” 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. “So a mild broad-based stimulus is likely and it’s a reason investors may get in there.”

China ETF Climbs

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., increased 1.4 percent in its second day of gains to $32.63.

Shanghai-based Giant Interactive jumped the most since April 2 to $4.79 while VanceInfo, which counts International Business Machines Corp., the world’s biggest computer-services provider, among its customers, surged 9.2 percent, the most since Feb. 1, to $9.69.

Melco Crown gained for the first time this week, adding 2.6 percent to $11.29 as Belle, which is controlled by companies belonging to Philippine billionaire Henry Sy, said it is in talks with the Macau casino operator to set up a gambling complex in Manila. Melco is the casino joint venture of Australian billionaire James Packer and a son of Hong Kong tycoon Stanley Ho.

Chinese monetary authorities may introduce policies to stabilize foreign trade, expand infrastructure investment, fine- tune monetary policies and structurally reduce taxes, according to commentary yesterday by the China Securities Journal.

Growth Estimates

The Shanghai Securities News reported on its front page yesterday that the People’s Bank of China may cut the reserve- requirement ratio next month as funds are expected to remain tight even after the 95 billion yuan ($14.9 billion) of reverse repos by the central bank on June 26. The ratio has been lowered three times since November.

Daiwa, Japan’s second-largest brokerage, cut its second- quarter growth forecast for China to 7.8 percent from 8.2 percent and its 2012 growth estimate to 8.3 percent from 8.4 percent, analysts Mingchun Sun and Chi Sun wrote in a note today.

Second-quarter growth of 7.8 percent would be the lowest since the global financial crisis in the first quarter of 2009, according to data compiled by Bloomberg. The economic data is scheduled to be released on July 13.

HSBC on June 26 cut its 2012 estimate for China to 8.4 percent from 8.6 percent, while Citigroup Inc. lowered its forecast on June 25 to reflect “anemic” domestic activity in the second quarter and further weakening of European demand.

LDK Solar Co., the world’s second-largest maker of solar wafers, fell after Roth Capital cut its 12-month price target to $1.70 from $3.50. LDK Solar’s American depositary receipts lost 4.2 percent to $1.82, a two-week low.

--Zhang Shidong. Editor: Allen Wan

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net