China's Stocks Rise on Policy Easing Speculation

China’s stocks rose, driving the benchmark index to its biggest gain in two months, amid speculation government data tomorrow will show economic growth slowed, giving policy makers scope to loosen monetary policy.

China Shenhua Energy Co. (601088) and China Coal Energy Co. advanced more than 2 percent on expectations an earthquake in Indonesia will strain supplies from the world’s largest exporter of thermal coal. Citic Securities Co. advanced to a nine-month high after the stock-market regulator approved 11 more overseas investors to buy yuan-denominated securities. Hainan Airlines Co. rallied on a plan to receive assets from its parent.

The Shanghai Composite Index (SHCOMP) gained 41.94 points, or 1.8 percent, to 2,350.86 at the close, its biggest advance since Feb. 8. The gauge climbed before data tomorrow that will probably show the economy expanded 8.4 percent in the first quarter, the slowest pace since 2009, according to the median of 41 economists’ estimates compiled by Bloomberg. Industrial production and retail sales accelerated in March while spending on fixed assets slowed, other government reports may show.

“The market is waiting for tomorrow’s data, which may definitely show the economy is slowing down,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “That may justify the government taking measures such as a cut in interest rates to boost growth.”

Economic Slowdown

The CSI 300 Index (SHSZ300) rose 2 percent to 2,570.44. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 1.8 percent in New York yesterday.

Thirty-day volatility in the Shanghai Composite was at 18.7 today, the highest level since March 2. About 7.5 billion shares changed hands in the gauge yesterday, 14 percent lower than the daily average this year.

The Shanghai index has gained 6.9 percent this year on speculation the government will cut lenders’ reserve requirements and borrowing costs to boost the economy. Stocks in the gauge are valued at 9.9 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg.

China may cut interest rates in the “immediate future” as inflation isn’t too high to prevent further easing of monetary policy, Michael Kurtz, chief Asian equity strategist at Nomura Holdings Inc., wrote in a report dated yesterday. Reports this week showed the inflation rate rose by a faster-than-estimated 3.6 percent in March, while growth in imports and exports slowed.

Loan Data

Policy makers have cut the amount banks must keep in reserves twice since November to free up cash for lending, in a bid to insulate the world’s second-largest economy from the effects of a global slowdown. Interest rates haven’t been reduced since 2008.

New local-currency lending was 1.01 trillion yuan ($160.1 billion) in March, the People’s Bank of China said on its website after the market closed. That compared with the median 797.5 billion yuan estimate in a Bloomberg News survey of 28 economists and 710.7 billion yuan the previous month. M2 money supply climbed 13.4 last month, accelerating from a 13 percent growth in February, the central bank said.

Shenhua, the nation’s largest coal producer, gained 2.3 percent to 26.24 yuan. China Coal, the second largest, added 2.3 percent to 9.19 yuan. Datong Coal Industry Co. (601001), the third biggest, climbed 2.9 percent to 13.24 yuan.

The 8.6-magnitude quake in Indonesia hit 431 kilometers (268 miles) off the coast of the western province of Aceh, one of the nation’s poorest provinces, where 170,000 people died or went missing in a tsunami in 2004.

Brokerages Gain

China’s Bohai-Rim Steam-Coal Price Index, which tracks power-station coal prices at six ports, rose 0.6 percent to 782 yuan a metric ton yesterday compared with a week earlier, according to the Qinhuangdao Seaborne Coal Market website.

China Hainan Rubber Industry Group Co. (601118), the nation’s sole listed producer of natural rubber, jumped 6.5 percent to 7.19 yuan on speculation the quake will disrupt supply from Indonesia, the world’s second-largest producer of the commodity.

Citic Securities (600030) led a gain among brokerages on expectations they will benefit from the regulator’s plan to expand the qualified foreign institutional investor, or QFII, program. The stock climbed 4.1 percent to 12.99 yuan, its highest close since July 15.

GF Securities Co., China’s second-biggest listed brokerage, gained 3.9 percent to 30.84 yuan. Haitong Securities Co., the third largest, advanced 4.4 percent to 10.22 yuan.

More QFIIs

JPMorgan Asset Management UK Ltd., American International Assurance Co. and nine other overseas investors were approved by the China Securities Regulatory Commission to receive investment licenses, according to data on the regulator’s website today.

The regulator has approved 158 QFIIs so far, the data showed. The CSRC said on April 4 it increased the QFII quotas to $80 billion from $30 billion.

Hainan Airlines (600221) rose 2.2 percent to 4.60 yuan. The company will receive stakes in Hong Kong Airlines and Grand China Air from the parent, the carrier said in a statement yesterday.

Chinese stocks traded in the U.S. rallied the most in a month yesterday, led by solar companies.

The Bloomberg China-US Equity Index’s advance yesterday was the biggest since March 13. Solar company Suntech Power Holdings Co. (STP) posted the largest gain on the gauge as Satcon Technology Corp., a maker of inverters that connect renewable energy to electricity grids, said bookings surged 130 percent in the first quarter from the last three months of 2011.