China’s Stocks Rise Most in Week After PBOC’s Zhou Pledges Help to Europe

Feb 15 (Bloomberg) - China’s stocks rose the most in a week after Premier Wen Jiabao and the central bank governor said they will help Europe resolve its debt crisis, easing concerns an export slowdown will worsen and curb economic growth.

Jiangxi Copper Co. and Aluminum Corp. of China Ltd. led a rally for metal producers after Zhou Xiaochuan said China can help Europe through its central bank and sovereign wealth fund. China Cosco Holdings Co., the world’s largest operator of dry- bulk ships, rose to its highest in two months on optimism Greece will commit to budget cuts to secure a second bailout package. Pingdingshan Tianan Coal Mining Co. (601666) advanced 4.6 percent after Shenyin & Wanguo Securities Co. recommended buying the stock.

“In the short term, they will get the funding and they will still survive,” Khiem Do, Hong Kong-based head of multi- asset strategy at Baring Asset Management Ltd., said in an interview on Bloomberg Television, referring to Greece. “As people don’t think China is going to hard-land, they’ll have to buy Asian emerging equities.”

The Shanghai Composite Index (SHCOMP) added 25.12 points, or 1.1 percent, to 2,369.89 as of 1:06 p.m. local time, the most since Feb. 8. The CSI 300 Index gained 1.4 percent to 2,556.45. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, slid 0.2 percent in New York.

The Shanghai Composite has climbed 7.8 percent this year on speculation the central bank will further cut lenders’ reserve- requirement ratios to spur growth. It announced a reduction in reserve ratios on Nov. 30, the first since 2008, after boosting them and interest rates last year to cool inflation.

‘Sincere and Firm’
China will participate in resolving Europe’s debt crisis, PBOC’s Zhou said in a speech in Beijing, echoing comments made yesterday by Premier Wen at a joint press conference with European Union President Herman Van Rompuy. The central bank is ready to be more involved in ending Europe’s crisis through the European Financial Stability Facility and European Stability Mechanism, Zhou said.

“China’s willingness to support Europe to cope with sovereign debt problems is sincere and firm,” Wen said at the conference. “China is ready to get more deeply involved in participating in solving the European debt issue.”

A measure of 54 material stocks in the CSI 300 advanced 2 percent today, the second most among the 10 industry groups. Jiangxi Copper, China’s biggest producer of the metal, rose 3.6 percent to 27.30 yuan. Chalco, the listed unit of the biggest maker of the lightweight metal, gained 2.5 percent to 7.34 yuan. Zhuzhou Smelter Group Co. (600961), China’s biggest producer of refined zinc, climbed 2 percent to 11.42 yuan.

European finance ministers canceled a Brussels meeting slated for today and will hold a teleconference instead to prod Greece to do more to clinch an aid package worth 130 billion euros ($170 billion) along with about 100 billion euros of debt relief from private bondholders. Greece needs the aid to make a 14.5 billion-euro bond payment on March 20.

Shippers Rally
Europe is China’s biggest export market, making up about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.

China Cosco jumped 5.4 percent to 5.68 yuan, heading for its highest close since Dec. 12. China Shipping Development Co., a unit of the nation’s second-biggest sea-cargo group, added 5.9 percent to 6.66 yuan. China Shipping Container Lines Co. (601866), the country’s second-largest carrier of sea-cargo boxes, surged 6.8 percent to 2.97 yuan.

The Baltic Dry Index (BDIY), a measure of commodity shipping costs, rose for a seventh session yesterday as demand to transport crops from South America helped to reduce the supply of vessels. The gauge climbed 0.7 percent to 734, according to the London-based Baltic Exchange.

‘Head-Fake Rally’
Pingdingshan Tianan Coal, the listed unit of China’s fifth- largest producer of the coal, advanced 4.6 percent to 12.85 yuan. Shenyin & Wanguo Securities raised the rating on the stock to “buy” from “neutral,” Liu Xiaoning, an analyst at the Shanghai-based brokerage, said in a report dated today.

The brokerage’s estimated price-to-earnings ratio for the coal producer this year of 13 times is lower than the industry average of 15 times, according to the report. Shenyin & Wanguo set a share-price estimate of 15.5 yuan.

The Shanghai Composite’s rally this year may falter as a so-called rising wedge pattern mirrors previous failed rebounds, according to Thomas Schroeder, managing director at Chart Partners in Bangkok. Schroeder, who turned bullish on yuan- denominated shares in late December when the benchmark index fell to the 2,170 level, has lowered his forecast to around 2,400 from the previous estimate of 2,550.

“Our concern stems from the current rising wedge similarity to previous false bounces and odds of a failed breakout or failure at the topside of the wedge near 2,375,” Schroeder said. “The price action is not that constructive which increases odds that this bounce is like previous formations and a head-fake rally.” A rising wedge pattern refers to a trading range on a chart that begins wide at the bottom and contracts as prices move higher.