Money

Equities rebound on policy hopes

By Zhang Shidong (China Daily)
Updated: 2010-08-07 09:32

SHANGHAI - Mainland stocks rebounded, extending gains for the benchmark index to a third week, as concerns about banks' stress tests eased and agriculture companies advanced after the worst floods in a decade boosted food prices.

The Shanghai Composite Index added 37.64, or 1.4 percent, to 2658.39 on Friday, reversing an earlier 0.8 percent decline. The gauge gained 0.8 percent for the week. The CSI 300 Index rose 1.6 percent to 2897.66.

The Shanghai index has rebounded 12 percent from this year's low set on July 5 as investors speculated the government will ease property curbs and allow more lending to counter a slowdown in economic growth. The benchmark measure is still down 19 percent in 2010, the world's second-worst performer.

Banks and property developers recovered on Friday after regulators said suggested risk factors aren't meant to signal likely changes in real-estate lending policies. Lenders will be instructed to "resolutely" curb speculation and "strictly" manage mortgage loans, they said.

Stocks dropped on Thursday after a person familiar with the matter said the regulator told banks to conduct stress tests that assume housing prices may drop as much as 60 percent in worst-case scenarios in some cities.

Related readings:  China stocks rise on Friday  HK stocks close 0.59% higher -- August 6  Stress?tests not signals of policy change: CBRC  Ministry of Agriculture urges to restore farming in flood-hit areas

A measure tracking consumer staple producers climbed 6.5 percent this week, the most among the 10 industries of the CSI 300, boosted by speculation they will be more resilient in an economic slowdown.

"The slowing in Chinese growth points to a relaxation of tightening measures sometime in the next few months," said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages about $95 billion, in an e-mail. "The key message is that growth in China is slowing but not collapsing."

"Consumption has to grow as a proportion to the economy," said Jesper Madsen, a fund manager at San Francisco-based Matthews International Capital Management.

China has sent teams of agricultural experts to 11 provinces to help repair damage sustained by rice and corn crops from recent floods, the farm ministry said in a statement.

The government called for restoration of farm activities in major corn producing regions including northeast provinces of Heilongjiang, Jilin and Liaoning, as well as southern provinces including Hunan and Hubei, where floods damaged the rice crop, according to the statement dated on Thursday.

Hang Seng gains

Hong Kong stocks rose, lifting the benchmark index to its biggest weekly gain in four months.

The Hang Seng Index rose 0.6 percent to close at 21678.80 on Friday, after falling as much as 0.4 percent earlier.

The measure climbed 3.1 percent this week., the largest weekly gain since the week ended April 9.

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