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Mainland stocks rise on signs lending restrictions will ease

01-21-2012 08:58 BJT

SHANGHAI - Stocks on the Chinese mainland rose, led by financial companies and commodity producers, on signs the government will ease lending restrictions to spur growth.

Industrial & Commercial Bank of China Ltd (ICBC) and China Construction Bank Corp advanced as the regulator weighs a plan to relax capital requirements for lenders, four people with knowledge of the matter said. PetroChina Co and Jiangxi Copper Co climbed as oil and metal prices increased. The nation's markets will be shut next week for the Spring Festival holiday.

"The government's major task will be maintaining stable economic growth this year," said Zhang Ling, general manager at Shanghai River Fund Management Co. "We should be seeing more pro-growth measures going forward and easing restrictions on lending is a good start."

The Shanghai Composite Index rose 29.69 points, or 1.3 percent, to 2296.08 at the close. The CSI 300 Index gained 1.9 percent to 2468.35. The Bloomberg China-US 55 Index, the measure of the most-traded US-listed Chinese companies, added 0.5 percent on Wednesday in New York.

Ten-day volatility on the Shanghai Composite climbed on Thursday to the highest level since November 2010, after the gauge rose or fell by more than 1.3 percent on eight of the 12 trading days this year.

The Shanghai index has gained 4.4 percent this year on expectations the government will ease monetary policies and after Premier Wen Jiabao called for measures to boost confidence in equities.

The index trades at 9.4 times estimated earnings, near the record low of 8.9 times reached on Jan 6, according to weekly data compiled by Bloomberg. It was the worst performer among the world's 15 biggest markets in the two years through 2011 with a 33 percent drop.

Investor approvals

China is approving overseas investment into yuan- denominated shares at the fastest pace in at least 3 1/2 years as foreign-exchange reserves slump. The regulator awarded 14 licenses last month for qualified foreign institutional investors to trade the nation's stocks and bonds. That's the most since at least May 2008, according to filings by the China Securities Regulatory Commission. Currency holdings dropped to a seven-month low of $3.18 trillion on Dec 31.

ICBC, the nation's biggest listed lender, added 1.2 percent to 4.36 yuan (69 US cents). China Construction Bank Corp, the second biggest, gained 0.8 percent to 4.85 yuan.

Bank of Communications Ltd (BoCom), partly owned by HSBC Holdings PLC, climbed 1.5 percent to 4.83 yuan. BoCom was raised to "buy" because it may post a 20 percent increase in earnings this year, higher than the average level of its major rivals, Ni Jun, Xu Bingyu and Wang Yuxuan, analysts at Shenyin & Wanguo Securities Co, wrote in a report on Thursday. The previous rating was "outperform," according to data compiled by Bloomberg.

Risk weightings

The China Banking Regulatory Commission is delaying implementing the most stringent capital adequacy ratios and may lower risk weightings for loans to small businessmen and companies, the people said, declining to be identified as the matter is confidential. The watchdog may also allow banks to increase the excess bad-loan reserves used in calculating risk buffers, they said.

The People's Bank of China is putting cash into lenders by buying bills from them instead of lowering their reserve ratios, the Securities Times reported on Thursday, citing Lu Zhengwei, an economist at Industrial Bank Co. The amount of lending may exceed 1 trillion yuan in January, the newspaper cited Lu as saying.

The economy grew 8.9 percent last quarter, below 9 percent for the first time since mid-2009, based on previously reported data. China relaxed lenders' reserve requirements in December for the first time since 2008 as inflation slowed to a 15-month low and exports gained the least in two years amid Europe's debt crisis.

A leading economic index for China rose 0.7 percent to 222.0 last month, The Conference Board, a New York-based research organization, said on its website on Thursday.

Oil, copper

PetroChina, the nation's biggest oil company, rose 0.4 percent to 10.26 yuan. China Petroleum & Chemical Corp, the second biggest, climbed 1.1 percent to 7.66 yuan. Jiangxi Copper, China's biggest producer of the metal, advanced 2.3 percent to 25.62 yuan. Tongling Nonferrous Metals Group Co, the second largest, added 3 percent to 20.31 yuan.

Oil rose as much as 1 percent in New York after US crude stockpiles fell the most in six weeks, while copper advanced 1.3 percent in Shanghai.

Chinese listed companies have started to announce annual earnings reports and will finish before the end of April. Twenty-nine companies in the Shanghai Composite have released annual profits for 2011 so far with an average gain of 15 percent, according to data compiled by Bloomberg. That compared with an increase of 38 percent in the previous year.

Editor:Wang Chuhan |Source: China Daily

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