Oxstones Investment Club™By Bloomberg News – Nov 8, 2010 7:30 AM GMT+0200
China stocks rose, led by developers and automakers, amid speculation capital inflows will increase on U.S. quantitative easing and the central government will succeed in boosting domestic consumption.
Poly Real Estate Group Co. climbed the most in two weeks after Caixin cited China Construction Bank Corp.’s chairman as saying overseas inflows into property have been “formidable.” SAIC Motor Corp., the largest automaker, gained 3.2 percent after a government economist said consumption will be a priority in the next five-year plan. PetroChina Co., the country’s largest oil company, rallied 2.4 percent as oil traded close to a two-year high.
The Shanghai Composite Index gained 19.37, or 0.6 percent, to 3,148.87 at 1:14 p.m., set for the highest close since April 15. The measure rose 5.1 percent last week as the Federal Reserve unveiled on Nov. 3 plans to buy an extra $600 billion of Treasuries. The CSI 300 Index added 0.4 percent to 3,533.22.
“The quantitative easing by the U.S. is driving speculative capital into China,” said Zhou Xi, a Tianjin-based strategist at Bohai Securities Co. “That has raised the stakes for regulators who must grapple with inflation and excess liquidity.”
Policy makers from Asia to South America have warned that the Fed’s decision to pump liquidity into the U.S. will depress the dollar and spark flows of capital to emerging markets that threaten asset-price bubbles. China will release October data including industrial production and inflation on Nov. 10.
Developers Gain
A measure of Shanghai-traded property stocks rose 1.7 percent to a seven-month high. Poly Real Estate jumped 2.44 percent to 15.13 yuan, extending two straight weeks of gains. China Vanke Co. climbed 2.3 percent to 9.96 yuan.
There has been “formidable” foreign speculative capital inflows into China’s property market, Caixin reported on its website Nov. 5, citing the text of a speech by Guo Shuqing, chairman of China Construction Bank.
China’s home price growth will slow in October to 8.9 percent, according to the median of six economists in a Bloomberg News survey. Prices in 70 cities gained 9.1 percent in September, according to data from the statistics bureau, which is due to report last month’s figures Nov. 10.
SAIC gained 3.2 percent to 20.83 yuan. Tianjin FAW Xiali Automobile Co. jumped 10 percent and FAW Car Co. rose 5.5 percent to 21.32 yuan.
Consumption will be made a priority ahead of investment and exports in the next five-year plan, Yao Jingyuan, chief economist for the National Bureau of Statistics, said Nov. 5.
Unequal Growth
The nation’s worsening income inequality has a negative effect on consumption, and the key to stimulating consumption is to ensure that urban and rural household incomes grow as fast as gross domestic product, Yao said at a forum in Beijing.
China, while first in economic expansion since 1970, ranks 79th out of 135 nations in increasing life expectancy and adding years of schooling in that period, according to the United Nation’s Human Development Report 2010 released last week.
PetroChina rose 2.4 percent to 12.28 yuan, a sixth consecutive advance and the biggest contributor to gains on the Shanghai Composite.
Crude oil climbed after a U.S. jobs report last week boosted confidence in the world’s largest economy. U.S. Labor Department figures showed payrolls climbed by 151,000, exceeding the median estimate of economists surveyed by Bloomberg News. Private payrolls that exclude government agencies also gained more than forecast, and the jobless rate held at 9.6 percent.
‘Higher Prices’
Crude added 36 cents to $86.85 on Nov. 5, the highest settlement since Oct. 8, 2008. Oil was at $86.92 a barrel at 1:57 p.m. Sydney time.
“Oil is quite positive, the market has taken heart in the unemployment rate,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. “Crude has broken through the topside of the range, so you’ve got to look for higher prices.”
The Shanghai Composite, which tracks the bigger of China’s stock exchanges, has rebounded 33 percent since reaching this year’s low on July 5 on expectations central banks around the world will inject more cash into their economies to boost growth. It remains down 3.9 percent this year after the government raised bank reserve requirements and curbed lending growth to cool the economy.
A gauge tracking materials producers on the CSI 300 slipped 0.5 percent, the most among the 10 industry groups. Jiangxi Copper slid 2.5 percent to 44.18 yuan and Yunnan Copper Industry Co. dropped 2.2 percent to 28.50 yuan.
Copper for February delivery fell as much as 0.9 percent to 66,810 yuan a ton on the Shanghai Futures Exchange.
Economic Data
The government is scheduled to release October statistics on trade, inflation, retail sales, industrial production and fixed-asset investments this week.
Inflation may exceed 3 percent this quarter driven by rising agricultural product prices, the China Securities Journal reported, citing State Information Center Chief Economist Fan Jianping. The inflation rate may increase to 4 percent or higher next year, Xinhua News Agency said Nov. 6, citing Zhu Baoliang, chief economist for the State Information Center.
China’s central bank unexpectedly raised benchmark lending and deposit rates on Oct. 19, two days before official data showed inflation had accelerated to the fastest pace in 23 months.
China should return to a “normalized” monetary policy as quantitative easing in the U.S. pumps cash into the world’s fastest-growing major economy and fuels price risks, the central bank’s research head Zhang Jianhua said Nov. 4.
Source: bloomberg.com
Tags: asian, capital flows, China Construction Bank Corp., chinese stocks, emerging markets, FAW Car Co., PetroChina Co., quantitative easing, SAIC Motor Corp, Shanghai Composite Index, speculative capital, Tianjin FAW Xiali Automobile Co., weak dollar