China’s stock futures signal gains for indexes

Corporate earnings said to fuel rise

China’s stock-index futures rose, signaling gains for equities following a rally last week that drove benchmark indexes to two-week highs.

Futures on the CSI 300 Index expiring in April added 0.8 percent to 2,645 as of 9:27 a.m. local time. China Construction Bank Corp. may advance after fourth-quarter profit beat estimates. China Petroleum & Chemical Corp. may move after posting lower 2012 profit. China Vanke Co. may drop after China Business Journal reported Beijing is seeking opinions on raising minimum down payments on second mortgages.

Corporate earnings serve “to boost confidence in the market and may keep markets on the uptrend in the short term,” Liu Guangming, an analyst at Dongxing Securities Co., said today from Beijing.

The Shanghai Composite Index added 0.2 percent to 2,328.28 on March 22, the highest level since March 6. The CSI 300 Index rose 0.1 percent to 2,618.31, the highest since March 7. Hong Kong’s Hang Seng China Enterprises Index lost 0.4 percent. The Bloomberg China-US 55 Index advanced 1 percent in New York.

The MSCI Asia Pacific Index gained 0.8 percent today after a European Union official said an agreement has been made on an aid package for Cyprus. A deal moves the country toward eliminating the threat of default and lessens the chance of a disorderly exit from the euro currency.

The Shanghai Composite has dropped 4.4 percent from a Feb. 6 peak on concern that an economic recovery will falter as officials take steps to cool the property market and counter risks for banks from an expansion in credit.

Rate Increases

The Shanghai gauge, which changed directions at least 10 times on March 22, saw 30-day volatility jump last week to the highest level since February 2012, according to data compiled by Bloomberg. The index is valued at 9.5 times projected 12-month earnings, compared with the seven-year average of 15.8, according to data compiled by Bloomberg. Trading volumes were 14 percent lower than the 30-day average on March 22, according to data compiled by Bloomberg.

China’s swap market is signaling interest-rate increases for the first time since 2011 after inflation accelerated to a 10-month high and the housing market defied government cooling efforts.

Two-year contracts that exchange the People’s Bank of China’s 3 percent savings benchmark for a fixed payment rose eight basis points this month to 3.03 percent, data compiled by Bloomberg show. The swap had been lower than the one-year PBOC deposit rate for 16 months. Of the 27 economists surveyed this month by Bloomberg, 13 predicted higher rates in 2013, with Credit Agricole CIB, Daiwa Capital Markets and Nomura Holdings Inc. forecasting two increases.

Solar Stocks

PBOC Governor Zhou Xiaochuan said on March 13 the government should be on “high alert” after consumer prices jumped 3.2 percent in February. Data last week showed new home prices last month posted the broadest advance since December 2011. China’s 10-year bond yield is 38 basis points higher than inflation, compared with a similar U.S. real yield of minus 8 basis points.

The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., added 0.3 percent to $36.94 March 22 in New York, trimming its second weekly slump to 1.3 percent.

Solar stocks, the most volatile Chinese equities in New York, will extend declines as Suntech Power Holdings Co.’s bankruptcy stokes concern they are over-leveraged, according to Gamco Investors Inc.

Four of the five stocks with the highest annualized volatility among the most-traded Chinese companies in the U.S. are solar makers, data compiled by Bloomberg show. LDK Solar Co., the solar wafer maker which has fallen 15 percent in 2013, is posting the widest price swings behind Suntech, which plunged 40 percent last week after defaulting on $541 million of bonds.

Bloomberg News

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