China Stocks Rise Most in 3 Months on Loan, Money Data

(Corrects job title of Ha in third paragraph in story published yesterday.)

China’s stocks (IFB1) rose the most in three months after new lending and money supply exceeded estimates in December, boosting speculation the government is relaxing monetary policies to bolster economic growth.

China Merchants Bank Co. (600036) and China Construction Bank Corp. (939) led gains for lenders after money supply grew at the fastest pace since July. China Shenhua Energy Co., the nation’s largest coal producer, advanced the most in 10 months on expectations new loan growth will boost demand for commodities. Anhui Conch Cement Co. (600585) climbed 5.6 percent after the Xinhua News Agency said the banking regulator will ensure demand for loans for the construction of affordable housing.

“It shows the government’s policy of fine-tuning monetary policies is taking effect,” Ha Jiming, vice chairman and chief investment strategist for Goldman Sachs Group Inc.’s investment management division for China, said in an interview with Bloomberg Television today. “The government is able to engineer a soft landing, maintaining economic growth at around 8 percent. The market this year will have some opportunities.”

The Shanghai Composite Index (SHCOMP) gained 62.50 points, or 2.9 percent, to 2,225.89 at the close, its biggest advance since Oct. 12. The CSI 300 Index (SHSZ300) jumped 3.4 percent to 2,368.57. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 1.4 percent on Jan. 6 in New York.

The Shanghai Composite rose the most in Asia today, lifting the gauge’s valuations to 9.1 times estimated earnings from a record low of 8.9 times reached on Jan. 6, according to weekly data (SHCOMP) compiled by Bloomberg.

The index slid 1.6 percent in the first trading week of the year on concern a credit crunch will hurt corporate profits, extending a 22 percent plunge in 2011. China’s benchmark money- market rate had the biggest weekly decline since November last week as the central bank refrained from selling bills to help ease a cash shortage ahead of the week-long New Year public holiday starting Jan. 23.

Chinese stocks are on the “brink of capitulation” after more than 100 stocks in the Shanghai and Shenzhen stock exchanges plunged by the maximum daily limit on Jan. 5, according to China International Capital Corp.

This is “one of the signs of market panic,” Hao Hong, CICC’s Beijing-based global equity strategist, said in a report today. He said the market is “near-term oversold” and may see a “fleeting technical rebound” after China’s December lending and money supply growth figures.

Chinese new loans totaled 640.5 billion yuan ($101 billion) last month, the highest amount since April, the People’s Bank of China said yesterday. That exceeded the estimates of all 18 economists surveyed by Bloomberg. M2, a measure of money supply, rose 13.6 percent, the fastest pace since July, it said. That compared with the 12.9 percent median of 18 estimates.

Construction Bank, the country’s second-largest bank, gained 1.9 percent to 4.74 yuan. Merchants Bank rose 3.3 percent to 12.38 yuan. China Minsheng Banking Corp. (6000016), the first privately owned bank, advanced 2.5 percent to 6.18 yuan.

Premier Wen Jiabao called for measures to boost confidence in the nation’s stock market, the Shanghai Securities News reported today, citing his comments at the National Financial Work meeting. He urged reforming initial public offerings and improving companies’ dividend payouts, according to the report.

The China Securities Regulatory Commission is studying measures to curb IPO speculation, the Shanghai Securities News reported today, citing the regulator’s assistant chairman Zhu Congjiu. The measures may include allowing institutional investors to buy more IPO shares, it said.

Wen’s call “will help” equities recover from a two-year slump, according to the head of UBS AG’s China operations.

The premier’s comments signal the government may take more measures to boost stocks, including allowing social security funds to buy equities, David Li, UBS’s chairman and country head for China, said in an interview in Shanghai. Funds may flow out of the property market and into stocks as the government isn’t showing any inclination to ease curbs in the real-estate industry because prices “are still high,” he said.

Central bank governor Zhou Xiaochuan said yesterday the nation must be ready to combat possible shocks from Europe’s debt crisis and an uncertain U.S. economic outlook. China cut the reserve requirement for the first time since 2008 on Nov. 30 as Europe’s debt crisis eroded demand for its exports.

A measure of 24 energy stocks on the CSI 300 jumped 6.7 percent today, the most among the 10 industry groups. Shenhua surged 7.2 percent to 26.01 yuan, the biggest gain since March 7. China Coal Energy Co., the second-largest coal producer, advanced 7 percent to 9.28 yuan. Datong Coal Industry Co. (601001), the third largest, climbed 8.9 percent to 12.82 yuan.

The China Banking Regulatory Commission will ensure demand for loans for building affordable housing are “reasonably met,” Xinhua reported yesterday, citing Chairman Shang Fulin.

Anhui Conch, China’s biggest cement maker, gained 5.6 percent to 15.55 yuan. Gansu Qilianshan Cement Group Co. climbed 5.2 percent to 9.19 yuan. Huaxin Cement Co., an affiliate of Holcim Ltd., rose 5.5 percent to 12.93 yuan.

Cement stocks also rebounded after dropping last week on speculation a tax may be imposed on industries that emit carbon such as cement. China would have difficulties implementing such a tax on cement production as there have been no discussions between the government, China Cement Association and cement companies, Kevin You, an analyst at Samsung Securities Asia Ltd., said in report dated Jan. 6.

The Shanghai Composite will gain 36 percent because slowing inflation will let policy makers cut interest rates and bank reserves, according to Zhang Han, a strategist at Guotai Junan Securities Co., the only major brokerage to foresee the slump in the past two years. CICC forecasts a “slight” drop since the economy isn’t slowing enough to permit “aggressive” reductions in borrowing costs.

“Liquidity will improve as a result of the government’s easing policies,” Zhang said in an interview on Dec. 21. “That’ll help stocks to rebound in the first quarter.”

To contact Bloomberg News staff for this story: Bloomberg News in Shanghai at [email protected]

To contact the editor responsible for this story: Darren Boey at [email protected]