Equities gain on talk of policy easing

Updated: 2011-11-03 07:58

By Zhang Shidong (China Daily)

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SHANGHAI - Stocks on the Chinese mainland rose to a six-week high on speculation the central bank may ease monetary policy to bolster the economy as Europe's debt crisis and slumping manufacturing in China and the US threaten global growth.

China Minsheng Banking Corp and Poly Real Estate Group Co led gains for financial companies as money rates declined on prospects the central bank will ease a cash shortage.

China Railway Group Ltd jumped the most in nine months after the Xinhua News Agency said the railway ministry will get financial support to make payments.

China National Software & Service Co surged by the 10 percent limit after the Shanghai Securities News reported China will cut taxes on software products.

The Shanghai Composite Index advanced 1.4 percent to 2504.11, the highest since Sept 21. The CSI 300 Index climbed 1.7 percent to 2742.36. Stocks earlier fell on concern a referendum in Greece will threaten Europe's bailout.

"With inflation showing signs of easing, there will be more policy loosening and investors are boosting their stock positions to reflect that," said Dai Ming, fund manager at Shanghai Kingsun Investment Management & Consulting Co. "We'll probably see some relaxation on credit growth soon."

The Shanghai Composite has rebounded 6.5 percent from this year's low on Oct 21 as Premier Wen Jiabao said on Oct 25 the government will fine-tune economic policies as needed. The government said this week it will lower the threshold for payment on value-added and business taxes for small companies. It has also announced measures to help small businesses through easier access to bank loans.

China's inflation may ease to 5.3 percent or 5.4 percent in October, said Zhu Jianfang, a Beijing-based economist at CITIC Securities Co. He's the most accurate forecaster of the number in Bloomberg News surveys over the past two years. The figure is due next week. Consumer prices rose 6.1 percent in September.

The government may keep "relatively easing" credit policy through the fourth quarter, the China Securities Journal reported on Wednesday, citing unidentified banking sources.

The four biggest banks extended 60 billion yuan ($9.45 billion) of loans from Oct 21 to Oct 27, compared with 80 billion yuan during the first 20 days of the month, according to the report.

The Shanghai index has fallen 11 percent this year after the central bank raised interest rates three times and lifted the reserve-requirement ratio to curb inflation that's near a three-year high. It's valued at 11.7 times estimated earnings, compared with a record low of 10.8 times on Oct 21, according to weekly data compiled by Bloomberg.

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