China Stocks Gain to 4-Month High on Government Stimulus Report

By Zhang Shidong

Feb. 4 (Bloomberg) -- China’s stocks rose to the highest in four months on expectations stimulus measures will revive growth in the world’s third-largest economy.

Industrial & Commercial Bank of China Ltd., the nation’s biggest listed lender, added 3 percent and China Merchants Bank Co. climbed 4.2 percent after the China Securities Journal said banks advanced record new loans last month, prompted by the government. China Eastern Airlines Corp. gained 3.1 percent as the new management said it will limit expansion to narrow its loss “significantly” this year.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, rose 46.94, or 2.3 percent, to 2,107.75 at the close, the highest since Oct. 7. The CSI 300 Index, measuring the exchanges in Shanghai and Shenzhen, gained 2.7 percent to 2,166.41.

“Sentiment is quite strong as investors are betting that these stimulus plans put in place will turn things around,” said Yan Ji, an investment manager at HSBC Jintrust Fund Management Co. in Shanghai, which manages the equivalent of about $850 million. Yan said he’s buying financial stocks and companies in industries targeted by the stimulus plans.

The Shanghai Composite Index, the world’s second-best performer this year, has rebounded 21 percent since the government pledged 4 trillion yuan ($584 billion) of spending to revive economic growth. The central bank has also cut the key lending rate five times since September to support industries and stem job losses.

The government started investing its second allocation of funds from the stimulus package, Xinhua News Agency reported yesterday. It spent 130 billion yuan, its second injection after 100 billion yuan of funds in the fourth quarter, it said.

Lending Targets

Industrial & Commercial Bank rose 3 percent to 3.84 yuan. China Construction Bank Corp., the country’s second-largest bank, added 2.7 percent to 4.19 yuan. China Merchants Bank Co., the nation’s biggest dual-currency credit-card issuer, climbed 4.2 percent to 14.50 yuan. Shenzhen Development Bank Co., controlled by buyout firm TPG Inc., jumped 9.1 percent to 13.04 yuan, taking the stock to the highest close since Sept. 10.

Chinese banks may have offered a record 1.2 trillion yuan of new loans in January, the China Securities Journal reported, citing people it didn’t identify.

The four biggest state-owned banks completed 20 percent of their full-year target, with the majority of the loans lent for railways, highways, electricity grids and other infrastructure projects, the report said. Chinese banks tend to frontload their lending at the beginning of the year to ease operating pressure, it said.

Industry Aid

Liuzhou Iron & Steel Co. jumped by the 10 percent daily limit to 3.87 yuan. Tangshan Iron & Steel Co., the country’s fifth-biggest steelmaker, gained 9.3 percent to 4.70 yuan. Wanxiang Qianchao Co., the listed unit of China’s largest auto- parts maker, advanced 7 percent to 5.17 yuan.

The country will offer financial support to shipbuilders and encourage domestic shipping lines to use made-in-China vessels, Shanghai Securities News said. The government may also offer tax rebates to companies that sell vessels to overseas shipping lines, it said.

A stimulus plan for the textile and machinery industries will be submitted to the Cabinet today, Shanghai Securities News said yesterday. The government said Jan. 14 it would cut taxes and offer subsidies for the auto and steel industries.

China Eastern

China Eastern rose 3.1 percent to 4.97 yuan. The company expects to break even next year and to post a profit in 2011, Liu Shaoyong told reporters yesterday in Shanghai after being appointed as the company’s chairman. The airline will only accept 13 new planes this year, down from a previously planned 29, added new President Ma Xulun.

The airline has drawn up 256 cost-cutting measures and it aims to pare spending by 3 billion yuan ($439 million) this year, Liu added. China’s government moved Liu to the carrier from China Southern Airlines Co. and agreed to a 7 billion yuan bailout as the company struggles with debts and fuel-hedging losses.

The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.

Air China Ltd. (601111 CH), the nation’s largest international carrier, rose 0.11 yuan, or 2.4 percent, to 4.62. Air China was upgraded to “buy” from “hold” at Deutsche Bank AG on prospects of a rebound in earnings.

Maanshan Iron & Steel Co. (600808 CH), China’s fourth- largest listed steelmaker, added 0.09 yuan, or 2.5 percent, to 3.72. The company was raised to “buy” from “sell” at UBS AG after the broker said it changed the way it valued the stock.

Ping An Insurance (Group) Co. (601318 CH), China’s second- biggest insurer, added 0.92 yuan, or 3.1 percent, to 31.03. Ping An plans to vote against BNP Paribas SA’s revised bid for some of Fortis’s units, saying the improved terms aren’t sufficient.

Shanghai Zhenhua Port Machinery Co. (600320 CH), the world’s biggest maker of container cranes, rose 0.18 yuan, or 1.9 percent, to 9.71. Zhenhua Port said it received regulatory approval to issue 3 billion yuan ($439 million) worth of shares to buy a factory and an office building from its parent.

Suzhou Industrial Park New Sea Union Telecom Development Co. (002089 CH), a manufacturer of telecommunication products, jumped 0.72 yuan, or the 10 percent limit, to 7.96. The company was given a “buy” rating in new coverage at Shenyin & Wanguo Securities Co., citing the development of high-speed, or so- called 3G mobile-phone services, will increase demand for the company’s products. The brokerage had a six-month price target of 13 yuan to 15 yuan.

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net