China's Stocks Head for Weekly Gain Amid Stimulus Speculation - Bloomberg

By Bloomberg News - 2012-06-15T02:26:10Z

China’s stocks rose, extending a weekly advance, on speculation global central banks will take action to bolster economies amid Europe’s sovereign debt crisis.

Jiangxi Copper Co. (600362) paced gains among commodity producers as metal and oil prices increased. Haitong Securities Co., the country’s second-largest listed brokerage by market value, advanced 0.6 percent on plans to boost its margin financing and short selling business. Inner Mongolia Yili Industrial Group Co. (600887), China’s biggest dairy producer by sales, tumbled by the 10 percent daily limit as the company said it found “abnormal” levels of mercury in its baby formula.

“It looks like that global central banks are already prepared for aid packages in case economies slows further and Greece’s problem deteriorates,” Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co., said by phone today. “Liquidity injection is the most likely one and that’s what stock markets like.”

The Shanghai Composite Index (SHCOMP) rose 9.06 points, or 0.4 percent, to 2,305.01 as of 9:48 a.m. local time. The measure has gained 1.1 percent this week. Bloomberg News reported that U.K. Chancellor of the Exchequer George Osborne and Bank of England Governor Mervyn King are preparing two programs to increase the flow of credit. Reuters said that central banks are prepared to take action if needed to boost liquidity in financial markets if the Greek elections cause tumultuous trading, citing officials linked to the Group of 20 nations.

The CSI 300 Index (SHSZ300) added 0.3 percent to 2,568.07 today. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, slid 0.5 percent in New York yesterday.

Stock Valuations

Thirty-day volatility in the Shanghai Composite was at 15.50 today, compared with this year’s average of 18.53. About 7.2 billion shares changed hands in the gauge yesterday, 18 percent lower than the daily average this year.

Concerns that a growth slowdown is deepening and Greece will leave the euro area have dragged the Shanghai index down 6.3 percent from this year’s high set on March 2. Stocks in the measure are valued at 10 times estimated earnings, compared with the five-year average of 17.8, weekly data compiled byu Bloomberg.

Jiangxi Copper, China’s biggest producer of the metal, gained 1.1 percent to 24.95 yuan. Tongling Nonferrous Metals Group Co., the second largest, added 1 percent to 21.09 yuan. Zhuzhou Smelter Group Co., the nation’s biggest producer of refined zinc, climbed 2.2 percent to 11.10 yuan.

Copper advanced 0.8 percent and aluminum rose 0.4 percent. Oil rallied 0.6 percent in New York.

Greek Polls

Greece will hold general elections on June 17, which may determine if the nation upholds austerity conditions attached to international aid, and could lead to the first ouster from the euro area. Almost 10 million Greeks will vote for the second time in six weeks after a May 6 ballot failed to yield a government.

China can further cut its reserve requirement ratio as M2 growth is “relatively slow” this year, according to a report by researchers at the Chinese Academy of Social Sciences published in the People’s Daily.

Haitong Securities gained 0.8 percent to 10.39 yuan. The brokerage said in a statement it plans to increase the size of its margin trading and short selling services to 15 billion yuan from 8 billion yuan. It also plans to invest an additional 2 billion yuan into its equity investment unit.

Yili tumbled by the 10 percent daily limit to 21.85 yuan after saying it recalled some of its products. Mercury can damage the central nervous system and the lungs or cause birth defects, with children especially vulnerable.

Chinese Internet stocks slipped in New York, led by Youku Inc. (YOKU)’s first decline in two weeks, as Credit Suisse Group AG (CSGN) and Deutsche Bank AG reduced their growth forecast for Asia’s largest economy. The iShares FTSE China 25 Index Fund (FXI), the biggest U.S.-listed China exchange-traded fund, rose 0.2 percent to $33.75 yesterday.

--Zhang Shidong. Editors: Richard Frost, Darren Boey

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