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China’s Stock-Index Futures Rise on Earnings Growth Prospects
Jan. 26 （Bloomberg） -- China’s stock-index futures rose, signaling the benchmark index may rebound from a two-day loss, on speculation recent losses may have been excessive relative to the outlook for earnings growth.
China Shipping Development Co. may gain after saying it expects 2010 profit to rise by about 60 percent. Changsha Zoomlion Heavy Industry Science & Technology Development Co. may pace an advance for machinery companies after Nomura Holdings Inc. rated the company “buy,” citing the outlook for profits and the prospects for a “sharp recovery” in exports.
Futures on the CSI 300 Index expiring in February, the most active contract, added 0.2 percent to 2,955.40 as of 9:17 a.m. local time. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, slid 18.3, or 0.7 percent, to 2,677.43 yesterday, the lowest since Sept. 30. The CSI 300 Index slipped 0.5 percent to 2,938.65.
The Shanghai gauge has lost 15 percent since a Nov. 8 high after the central bank raised the reserve requirement ratio for banks and interest rates to counter inflation. The People’s Bank of China ordered commercial lenders on Jan. 14 to set aside more reserves, adding to six similar increases last year. The central bank also raised interest rates twice in 2010.
The Shanghai stocks gauge is valued at 12.5 times estimated earnings, the lowest since January 2009, weekly data compiled by Bloomberg show. China’s economic growth is expected to slow to 9 percent this year, from 10.1 percent in 2010, according to median estimates of Bloomberg surveys. That’s still about triple the projected rate of U.S. expansion.
Chinese stocks may rebound, as the widest gap in four years between benchmark gauges for equities and industrial metals signals excess “pessimism” for the nation’s shares, according to Xinhu Futures Co.
The nation’s equities have been moving in tandem with global commodities since the Asian nation led a global recovery in 2009. The correlation between the two asset classes rose to a record high in November, according to Bloomberg data.
“Commodities are going to stay in a bull market as the global recovery continues to stoke demand,” said Jiang Lin, an analyst at Xinhu Futures in Shanghai. “Investors might be overly pessimistic about China’s stocks and the economy, and once the government relaxes tightening, stocks will have decent gains.”
The Shanghai Composite has dropped 4.7 percent this year, adding to a 14 percent decline in 2010. The London Metal Exchange LMEX index comprising copper, aluminum, lead, tin, zinc and nickel reached a three-year high on Jan. 12, after rising 24 percent last year.
China is planning to let foreign investors trade index futures for the first time, enabling them to mitigate risks in a stock market that is the worst-performing in Asia over the past year.
Qualified foreign institutional investors, or QFIIs, will have to keep the daily value of futures contracts within the investment quota already approved by the State Administration of Foreign Exchange, according to draft rules published on the China Securities Regulatory Commission’s website yesterday. The CSRC didn’t say when the final version of the rules will be released or when the rules will be effective.
China Shipping Development, the unit of China’s second- biggest sea-cargo group said it expects 2010 profit to rise by about 60 percent from 1.06 billion yuan （$161 million） a year earlier, citing an increase in international and domestic transportation demand.
Freezing weather in China’s south has led to an increase for China’s farm-produce prices in the week ended Jan. 23 from the previous seven days, Xinhua News Agency said late yesterday, citing the Ministry of Commerce. It’s the fourth consecutive increase for the gauge, according to Xinhua.
Meat and egg prices rose because of the approaching Chinese New Year holiday, with mutton gaining 1.4 percent on week, eggs 1 percent, beef 0.8 percent, pork 0.7 percent and chicken 0.2 percent, the news agency reported.
The State Council will hold a special meeting to discuss the proposed property tax, the state-run Securities Times reported, citing unidentified people. Officials from Shanghai plan to come to Beijing to wait for policy makers’ decision, it said, without giving details.
A property tax trial is an “indispensable” part of China’s new round of real estate controls, Jia Kang, head of the Ministry of Finance’s research institute, wrote in a commentary published in the People’s Daily’s overseas edition.
China will also extend a resource tax nationwide over the next five years, China Daily reported, citing Finance Minister Xie Xuren. The tax is currently being levied in the country’s northwest Xinjiang region, the report said.
Some commercial banks in China have raised their lending rates by as much as 45 percent over the benchmark rate because of a shortage of funds, the China Securities Journal reported today, citing an unidentified bank official.
Banks have extended large amounts of loans in January, leaving them short of funds, the Beijing-based newspaper reported. The report didn’t identify which banks had increased their lending rates.
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