China will lead the global recovery

By Bloomberg News – Oct 18, 2012 10:37 AM GMT+0800
China’s stocks rose, driving the benchmark index to the highest level in a week, after Premier Wen Jiabao said the economy has started to stabilize.
SAIC Motor Corp. led industrial companies higher as data showed the economy grew 7.4 percent in the third quarter, matching analyst estimates, and factory output accelerated in September. Shanghai Hanbell Precise Machinery Co. advanced 3.1 percent after the China Securities Journal said the government may issue guidelines on the use of geothermal energy. China Life Insurance Co. (601628), the nation’s biggest insurer, fell to the lowest level in six weeks after estimating declining profit.
The Shanghai Composite Index (SHCOMP) climbed 0.5 percent to 2,115.25 at 10:13 a.m. local time. The CSI 300 Index (SHSZ300) rose 0.5 percent to 2,312.55. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong gained 0.3 percent. The Bloomberg China-US 55 Index (CH55BN) added 0.4 percent in New York.
“The data shows initial signs that the economy has stabilized, which is good,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million. “It still remains to be seen if the improvement in the economy can be translated into good corporate earnings.”
The Shanghai Composite has rebounded 5.1 percent since reaching a three-year low on Sept. 26 on expectations regulators will introduce measures to stabilize the market ahead of a once- in-a-decade power transition of the Communist Party in November. The gauge is valued at 9.8 times estimated earnings, compared with the 17.9 average since Bloomberg began compiling the weekly data in 2006.

Economic Data

China’s economic situation is “relatively good,” Wen said yesterday, Xinhua News Agency reported. Wen said the government is confident of achieving annual targets and the economy will continue to show “positive changes,” Xinhua reported, citing his comments in meetings he held with industry leaders, company executives and some local government officials on Oct. 12-15.
The third-quarter growth figure compares with a previously reported 7.6 percent expansion in the second quarter.
Industrial production rose 9.2 percent in September, the report showed. That compared with the 9 percent median forecast of 37 analysts and an 8.9 percent gain in August.
SAIC, China’s largest carmaker, added 1.8 percent to 13.24 yuan. Anhui Conch Cement Co., China’s biggest cement maker, gained 1.1 percent to 16.31 yuan. Reports also showed retail sales and fixed-asset investment accelerated in September.

U.S. Housing

China’s September new home prices rose in fewer than half the cities monitored by the government from a month earlier, indicating property curbs are stabilizing the market.
Prices climbed in 31 cities of the 70 the government tracks from the previous month, compared with 35 cities in August, according to data released by the statistics bureau today. Prices fell in 22 cities, the data showed.
China Vanke Co., the biggest developer, rose 1.1 percent and Poly Real Estate Group Co., the second largest, added 1.5 percent to 10.76 yuan.
“It certainly looks like Chinese stocks have stabilized, which is heartening,” Timothy Ghriskey, chief investment officer at New York-based Solaris Group LLC, which manages about $2 billion in assets, said by phone yesterday. “China’s growth rate is still well above the rest of the world, and it remains a great opportunity.”
In the U.S., housing starts surged 15 percent in September to the highest level in four years, adding to signs of a revival in the industry at the heart of the financial crisis. The jump in U.S. housing starts is the latest sign that the world’s largest economy is gaining strength after growth slowed to a 1.3 percent annual pace in the third quarter.
The U.S. is China’s second-largest export market, making up about 17 percent of the nation’s overseas sales, according to Shenyin & Wanguo Securities Co.

China Life

Shanghai Hanbell rose 3.1 percent to 14.12 yuan. Dalian Refrigeration Co. climbed 2 percent to 7.83 yuan.
China may “soon” announce guidelines for geothermal energy exploration and use, the China Securities Journal reported, without saying where it got the information. The government will likely take more concrete measures on geothermal energy generation and subsidies in the future, it said.
China Life slid 1.9 percent to 17.35 yuan after saying profit for the first nine months of this year may fall about 55 percent because of lower investment yields and bigger impairment losses. The company’s American depositary receipts, each representing 15 underlying shares, lost 5.7 percent to $43.01 yesterday. The ADRs traded 3.4 percent below its Hong Kong stock, the biggest discount since March 6.
China’s publicly traded non-financial companies’ profits for the first nine months probably dropped 17 percent from the year-earlier period, almost unchanged from the first half, Li Peng, Huang Xindong and Chen Jianxiang, analysts at Shenyin & Wanguo Securities Co., wrote in a report yesterday.
Thirty-day volatility in the Shanghai Composite was at 19.6 yesterday, compared with this year’s average of 17.2. About 5.9 billion shares changed hands in the gauge, 23 percent lower than the daily average in 2012.
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose yesterday for a seventh day, adding 1.4 percent to a five-month high.
To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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