China stocks extend biggest gain in four months on stimulus bets

A woman walks past an electronic board of a local bank showing the Hong Kong share index

China’s stocks rose for a third day, led by property developers and commodity producers, on continued optimism policy makers will unveil more measures to boost growth at this week’s legislative meetings.
The Shanghai Composite Index completed its biggest three-day gain since November. Hangzhou Binjiang Real Estate Group Co. rallied for a fourth day on speculation rising home prices in the country’s top cities will buoy earnings. Hong Kong’s Hang Seng Index rose for a third day.
Chinese shares have rallied this week before tomorrow’s start of the National People’s Congress, where delegates will sign off on a new five-year economic plan, and as global equities climbed on improving U.S. economic data. The gains have pared the Shanghai measure’s losses this year to 19 percent. The index is still the worst performer among global benchmark indexes, on concern a weaker yuan will spur capital outflows and slowing economic growth will hurt earnings.
“The rebound can carry on in the short term, and the index may trend up to about 3,000, though it’s still likely to remain bumpy,” said Wu Kan, a fund manager at JK Life Insurance Co. in Shanghai. “The boom in the property market has boosted cyclical stocks and stocks on the property-industry chain. With the NPC coming, the market has some expectations about good policies.” Wu said he’s keeping stock holdings unchanged at about 50 percent of asset allocation.
The Shanghai Composite rose 0.4 percent to 2,859.76 at the close, while the CSI 300 Index added 0.2 percent. The Hang Seng Index fell 0.3 percent, while the Hang Seng China Enterprises Index added 0.2 percent, paring an advance of as much as 1.3 percent.
China plans to target broader money growth of 13 percent this year, a signal that further easing in monetary policy is likely, Reuters reported, citing people familiar with the matter. The target is to be announced in the legislative meeting.
Hangzhou Binjiang Real Estate advanced 1.3 percent, capping a four-day, 24 percent gain. Rise Sun Real Estate Development Co. climbed 1.4 percent.
Leveraged speculators are snapping up homes in the nation’s largest cities in the hope that prices will keep rising after policy makers added monetary stimulus and loosened property curbs. Property market speculators are using crowd funding and peer-to-­peer lending in Chinese tier-1 cities, the Economic Information Daily reported, without citing anyone.
China’s monetary policies have encouraged investors to pour money into real estate, inflating prices in cities such as Beijing, Shanghai and Shenzhen and increasing the risk that bubbles could form, central bank policy adviser Bai Chongen said in an interview.
The People’s Bank of China this week lowered lenders’ required reserve ratio by 0.5 percentage points in an effort to bolster the economy. A composite PMI gauge for manufacturing and services sectors fell to 49.4 in February from 50.1 in January, Caixin Media and Markit Economics said yesterday.
Yunnan Copper Co.gained 3.5 percent, while Tongling Nonferrous Metals Group Co. added 1.7 percent.
Energy stocks fell, dragging on the broader market, as a sub-­index dropped 0.1 percent after surging 4.9 percent on Wednesday. Shanxi Xishan Coal & Electricity Power Co. lost 0.7 percent in Shenzhen after jumping by the 10 percent daily limit a day earlier. Shanxi Lu’an Environmental Energy Development Co. retreated 3 percent.
Margin traders increased bullish positions for the first time in five days on Wednesday. The outstanding balance of margin debt on the Shanghai Stock Exchange rose from a 15-month low to 502.4 billion yuan (USD76.7 billion). Bloomberg