China’s stocks rise to 2-month high as consumer, property stocks advance(1)
China’s stocks advanced, driving the benchmark index to a two-month high, as a cash crunch eased and investors bought shares of companies whose earnings benefit from rising prices.
Liquor maker Kweichow Moutai Co. (600519) led an advance for consumer-staples producers after January inflation unexpectedly rebounded to 4.5 percent during the Chinese new year holiday on accelerating food prices. Ledman Optoelectronic Co. jumped 3.4 percent after benchmark money-market rates fell, signaling improving liquidity. China Vanke Co. paced a two-day rally for property developers. Jiangxi Copper Co. slid 2 percent as Greek leaders fell short of a full agreement on a rescue plan.
“The Spring Festival effect boosted January inflation and it’s a one-off rebound,” said Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co. “Prices will come down in the following months. But the central bank will be reluctant to relax monetary policies since the inflation rate is still perceived as high.”
The Shanghai Composite Index (SHCOMP) rose 2.06 points, or 0.1 percent, to 2,349.59 at the close, the highest since Dec. 2. About two stocks advanced for every one that declined. The CSI 300 Index (SHSZ300) gained less than 0.1 percent to 2,529.23. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 1.6 percent yesterday in New York, led by solar companies.
The Shanghai index has rebounded 6.8 percent this year on speculation the central bank will further cut lenders’ reserve- requirement ratios to spur growth. It announced a cut in reserve ratios on Nov. 30, the first reduction since 2008, after boosting them and interest rates last year to cool inflation that accelerated to its fastest pace in three years in July.
Holiday Distortions
Reserve-ratio cuts may be postponed after inflation jumped last month, Market News International reported, citing unidentified government officials and economists. Inflation pressure remains strong because Middle East tensions may boost oil prices, said a source familiar with discussions within the People’s Bank of China.
The January inflation rate compared with the median 4 percent estimate in a Bloomberg News survey of 33 economists and 4.1 percent in December. Producer-price inflation eased to 0.7 percent from a year earlier after a 1.7 percent gain in December, the statistics bureau said today. The Chinese holiday was from Jan. 22 to Jan. 28.
Export Outlook
A measure of consumer staples stocks in the CSI 300 advanced 0.4 percent. Kweichow Moutai, China’s biggest producer of baijiu liquor by market value, rose 1.3 percent to 190.75 yuan. Zhejiang Beingmate Scientific-Industrial-Trade Share Co. (002570), a producer of milk powder for babies, climbed 2.4 percent to 24.11 yuan.
“Most investors and traders know January inflation readings were significantly distorted by the Lunar New Year holiday,” Lu Ting, a Hong Kong-based economist at Bank of America Corp., wrote in a report today. Inflation may slow to below 4 percent this month, Wang Tao, an economist at UBS AG, said in an interview with Bloomberg Television today.
China’s exports probably fell 1.4 percent from a year earlier in January, according to the median estimate of 31 economist surveyed by Bloomberg News. Goldman Sachs Group Inc. expected a drop of 3 percent. The figure is due tomorrow.
Exports probably declined in January after a slowdown in foreign trade in the second half of last year, Commerce Minister Chen Deming said. Overseas shipments “cannot make us optimistic” and are “expected to have negative growth due to Chinese New Year and other factors,” Chen said today in a written response to questions from Bloomberg News.
