Most Chinese Stocks Rise on Bank Rules Delay, Policy Speculation

Most Chinese stocks rose after the government delayed tightening bank capital rules and investors speculated monetary policy will be eased to limit the effects of Europe’s debt crisis on the economy.

China Vanke Co. led gains for property developers after regulators postponed stricter bank rules until the beginning of next year in a move that may bolster loan growth. China Cosco Holdings Co., the biggest shipping company, advanced for the first time this month as European Central Bank President Mario Draghi said officials stand ready to act as the euro region’s outlook worsens. Shandong Gold Mining Co. slid 1.5 percent on speculation this week’s rally for gold stocks was excessive as data this weekend may show a deepening slowdown.

“Stocks are gaining because of developments in Europe while the bank rules delay are beneficial to financial stocks too,” said Chen Liqiu, a strategist at Jianghai Securities Co. in Shanghai. “The domestic economy is still a big concern and data this weekend is likely going to be bad,” Chen said, adding that he expects interest-rate cuts in the second half of 2012.

China joined a global stocks rally today on speculation policy makers will take steps to stimulate economic growth. The Standard & Poor’s 500 Index advanced 2.3 percent, the biggest gain this year, while the MSCI Asia Pacific Index increased 1.4 percent.

Global Outlook

Federal Reserve Bank of Atlanta President Dennis Lockhart said extending Operation Twist, the program to lengthen maturities of debt on the U.S. central bank’s balance sheet, is an “option on the table.”

The ECB is under pressure to lower rates and introduce more liquidity support for banks as governments struggle to fix a crisis that’s engulfing Spain and could force Greece out of the euro. Draghi stopped short of pledging longer-term financing to address the euro-zone’s debt crisis.

China Cosco rose 0.4 percent to 4.80 yuan. Europe represented 14 percent of the company’s revenue in fiscal 2010, up from 10 percent in the previous year, according to data compiled by Bloomberg.

The Shanghai Composite has fallen 2.8 percent this week, paring this year’s advance to 4.9 percent. Stocks in the measure are valued at 10 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg.

China Slowdown

A gauge of financial companies in the CSI 300 rose 0.6 percent. Industrial & Commercial Bank of China Ltd., the biggest lender, added 0.5 percent to 4.22 yuan. Bank of China Ltd. rose 0.3 percent to 3.03 yuan. China Vanke, the largest-listed developer, jumped 1.9 percent to 9.15 yuan, while Poly Real Estate Co. the second-biggest, surged 3 percent to 13.93 yuan.

The draft rules from the China Banking Regulatory Commission will allow lenders to include “excess” loan-loss provisions as capital, and will give a 10-year grace period to phase out capital instruments local banks have already issued that don’t qualify under the new rules, according to a statement posted on the central government’s website yesterday.

Regulators delayed the rules after banks warned that the change would cut lending capacity as the nation’s economic expansion slowed. The new standards were originally scheduled to take effect at the start of this year, before similar regulations in developed markets.

“The markets have been nervous about China’s so-called slowdown,” Adrian Lim, a senior investment manager at Aberdeen Asset Management Plc, said in an interview at Bloomberg’s headquarters in New York yesterday.

Strategic Industries

Data this weekend are expected to show fixed-asset investment expanded at the slowest pace in a decade in May, inflation matched a two-year low and industrial output grew less than 10 percent for a second month, Bloomberg economist surveys show.

The Chinese economy grew 8.1 percent in the first quarter, the least since the three months ending June 30, 2009. Europe is China’s biggest export market, making up about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.

China is also targeting 8 percent of gross domestic product by 2015 for so-called strategic emerging industries, HSBC Holdings Plc equity strategist Steven Sun said in report dated yesterday. The industries are new energy such as nuclear energy, energy-saving technology and environmental protection, next- generation information technology including cloud computing, bio-technology and high-end manufacturing, the report said.

Big IPO

Earnings growth for companies in these industries are “still high” at about 23 percent for 2012-2014, compared with 16 percent for companies in the CSI 300, the report said.

China National Nuclear Power Co. on June 5 won the environment ministry’s permission to sell shares to fund 174 billion yuan ($27 billion) of projects in the nation’s first initial public offering by a developer of atomic energy. The company may need to raise about 50 billion yuan from the share sale, Macquarie Group Ltd. said.

“Unless China National Nuclear prices its offering extremely high, investors will like it even though the overall market sentiment may not be ideal,” said Patrick Dai, an analyst at Macquarie in Hong Kong. “China National Nuclear will give the market something it has never seen.”

China should take advantage of a “relatively low” inflation to further liberalize interest rates as it seeks to bolster economic growth, former central bank adviser Li Daokui said yesterday.

Rate Outlook

The central bank may cut lending rates while pursuing rate reform to counter the effects of a troubled global economy, Li said in a speech in Singapore. Monetary policy remains “very tight” and there’s room for policy makers to reduce the amount of cash that lenders must set aside as reserves, he said. China last reduced borrowing costs in 2008.

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