China's Stocks Rise Most in 3 Weeks on Government Growth Pledge - Businessweek

China’s stocks rose, lifting the Shanghai Composite Index (SHCOMP) from a three-year low, as a government pledge to ensure stable economic growth overshadowed manufacturing data that missed estimates.

The Shanghai Composite Index gained 0.6 percent to 2,116.18 as of 9:56 a.m. local time, following a 5.5 percent drop in July. The CSI 300 Index (SHSZ300) advanced 0.7 percent to 2,349.27. Poly Real Estate Co. increased 1.1 percent, leading developers higher. SAIC Motor Corp., the nation’s biggest automaker, climbed 1.5 percent.

The Shanghai Composite sank 15 percent through yesterday from this year’s high on March 2 on concern the economic slowdown is deepening. A meeting of the Communist Party’s Politburo determined that maintaining stable growth is still the top priority, the official Xinhua News Agency reported yesterday. A purchasing managers’ index released today showed China’s manufacturing industry grew at the slowest pace in eight months in July.

“Investors’ confidence may be boosted by the government’s pledge for more measures,” said Zhang Yanbin, an analyst with Zheshang Securities Co. in Shanghai. “That should support the market a little. The downward trend hasn’t stopped as economic data is still weak.”

The Bloomberg China-US 55 Index (CH55BN), the measure of the most- traded U.S.-listed Chinese companies, fell 0.2 percent to 86.77 in New York yesterday, taking its July slump to 4.9 percent.

Downward Pressure

The Purchasing Managers’ Index fell to 50.1 in July from 50.2 in June, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement today. That compares with the 50.5 median estimate in a Bloomberg News survey of 24 economists. A reading above 50 indicates expansion.

Premier Wen said downward pressure on the economy is “relatively large” and pledged to use different monetary policy tools to ensure stable growth in money supply and bank credit, the official Xinhua News Agency reported yesterday, citing a speech on July 26. The government will “unswervingly” implement property controls and preventing home prices from rebounding, according to the report.

“The ongoing pace of economic growth is within expectations, but the external environment remains grim and poses difficulties and challenges,” Xinhua said yesterday, citing a Politburo meeting. The Politburo reiterated that China will pursue a “prudent” monetary policy and “proactive” fiscal policy.

Interest Rates

Jim O’Neill, chairman of Goldman Sachs Asset Management, said in an interview with Bloomberg Radio from London yesterday that he expects the People’s Bank of China to continue cutting interest rates to shore up the economy. The central bank has lowered borrowing costs twice since early June, reduced banks’ reserve requirements three times since November and sped approvals for investment projects as economic growth weakened.

SAIC Motor climbed 1.5 percent to 12.99 yuan. China will have more than 200 million vehicles by 2020, Xinhua News reported, citing a Ministry of Transport statement.

The iShares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., climbed 0.4 percent to $34.21, extending its monthly gain to 1.6 percent. The Standard & Poor’s 500 Index of the biggest U.S. shares declined 0.4 percent to 1,379.32 yesterday as investors awaited the Federal Reserve’s monetary-policy decision today.

Suntech Power Holdings Co. (STP) (STP), the world’s largest solar-panel maker based in Wuxi of China’s Jiangsu province, tumbled 16 percent to $1.13, after declining 15 percent a day earlier. Its July tumble sent the stock price to the lowest level since the company’s initial public offering in 2005, when it sold shares at $15 each.

Better Returns

Suntech said in a July 30 statement that 560 million euros ($689 million) of German bonds as collateral for payment of a loan to its affiliate Global Solar Fund S.C.A. Sicar may have never existed. It’s suing Javier Romero, a former Suntech sales representative who manages GSF, it said.

Chairman Shi Zhengrong defended the decision to funnel business in Europe through GSF yesterday. The affiliate “got better returns from developing downstream years ago when tariffs were higher,” Shi said in an interview.

New Oriental Education & Technology Group Inc., China’s largest private-education provider, climbed 4.8 percent to $11.42 yesterday in New York, trimming its tumble in July to 53 percent, the most since its IPO in 2006.

The Beijing-based company said July 17 the U.S. Securities and Exchange Commission was investigating it, and Muddy Waters followed with a report on July 18 to question the ownership of some of New Oriental’s schools, saying the company may have inflated its financial statements.

“The overall economic backdrop globally and in China is still questionable,” Timothy Ghriskey, chief investment officer at Solaris, which manages about $2 billion in assets, said in a phone interview from New York. “You also have accounting issues with Chinese companies, and right now the accounting issue is a difficult overhang. These things capture headlines and take down the whole Chinese market.”

-- Editors: Darren Boey, Richard Frost

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

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