Markets
Energy and mining stocks boost markets
By Irene Shen (China Daily)
Updated: 2011-05-14 10:01
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A booth of China Construction Bank Corp in Beijing Exhibition Center. The bank led gains for lenders after Goldman Sachs Group Inc said the increase in reserve requirements will have a limited effect on net interest margins. [Photo / China Daily] |
SHANGHAI - Stocks on the Chinese mainland rose on Friday, driving the benchmark index to its biggest gain in a month.
The advance followed speculation the government may limit interest-rate increases after ordering banks to set aside more reserves for a fifth time this year.
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"The increase in the reserve requirement isn't necessarily bad news for the market," said Hao Kang, a portfolio manager at ICBC Credit Suisse Asset Management Co, which oversees $9.2 billion. "It will ease speculation that there will be further tightening measures such as interest-rate increases in the near term. Some investors may see this as a buying opportunity amid weak market sentiment."
The Shanghai Composite Index advanced 26.95 points, to 2871.03 at the 3 pm close, its steepest gain since April 13. The measure rose 0.2 percent this week, its first advance in four weeks. The CSI 300 Index added 0.9 percent to 3128.09.
The People's Bank of China raised reserve requirements for banks by half a percentage point after data showed inflation and lending exceeded economists' estimates in April. The Shanghai Composite has retreated 6.1 percent from a five-month high on April 18 amid concern the PBOC will add to four increases in interest rates since early last year to cool inflation. The gauge has advanced 2.2 percent this year.
The increase in reserve requirements takes effect on May 18 and will boost levels for the nation's biggest lenders to a record 21 percent. The move locked up about 370 billion yuan ($57 billion), according to Barclays Capital.
ICBC climbed 2 percent to 4.58 yuan. China Construction Bank Corp added 1 percent to 5.12 yuan, and Bank of China Ltd rose 0.6 percent to 3.38 yuan.
Goldman Sachs is staying "positive" on Chinese banking stocks, analysts led by Ning Ma wrote in a report.
A leading indicator rose 1 percent in March to 157, the New York-based Conference Board said on its website on Friday. The "large" increase in the leading index, combined with a gain in a separate measure used by the Conference Board, "suggest the risk of a hard landing for China's economy in 2011 may be easing", said the organization's Beijing-based economist Bill Adams.
Jim O'Neill, who chairs Goldman Sachs Asset Management and coined the acronym BRIC for the economies of Brazil, Russia, India and China, said on Thursday that China's inflation "won't be a problem" in the second half of this year. Stocks may have a "big rally" as price gains moderate and tightening ends, he told reporters in Hong Kong.
Policy makers will raise borrowing costs only once more this year, after four increases in the past seven months, Goldman Sachs and Deutsche Bank AG predicted on Thursday. Calls from within the government to avoid policy "over-tightening" may influence interest-rate decisions, according to Ma Jun, a Hong Kong-based economist at Deutsche Bank.
China may end its tightening measures aimed at controlling inflation earlier than other emerging markets, according to Citigroup Inc. The inflation rate may approach 6 percent by the middle of the year and the "window" for an increase in rates is around June or July, said Citigroup economist, Shuang Ding, in an interview in Hong Kong.
Bloomberg News
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