Money

Benchmark bounces back from biggest decline in six weeks

By Zhang Shidong (China Daily)
Updated: 2010-08-12 10:20
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SHANGHAI - China's stocks rose, with the benchmark index rebounding from the biggest decline in six weeks, as a slowdown in industrial output growth and new lending spurred speculation the government will ease monetary policy.

Poly Real Estate Group Co climbed 2.5 percent, the most in two weeks. Production grew the least in 11 months in July, retail growth slowed and new loans climbed less than estimated, according to official data on Wednesday. Inflation quickened to 3.3 percent, the fastest in 21 months. China Minsheng Banking Corp added 1.3 percent after reporting higher profit.

The Shanghai Composite Index rose 12.22, or 0.5 percent, to close at 2607.5. The gauge swung between gains and losses more than 10 times amid concern that rising consumer prices will limit policy makers' ability to lift lending and property curbs. The CSI 300 Index advanced 0.6 percent to 2850.21.

"High inflation may force the government to think carefully about policy loosening," said Zhang Ling, a fund manager at Shanghai River Fund Management Co. "It's a dilemma for the government, which also pursues a relatively high economic growth rate."

The benchmark index has advanced 10 percent from this year's low on July 5 as investors speculated the government would ease property curbs and allow more lending to counter slowing growth.

That's pared 2010 losses to 20 percent, after the government increased down payment requirements on home sales and ordered banks to set aside more deposits as reserves.

Industrial Output

Industrial production rose 13.4 percent from a year earlier, the statistics bureau said in Beijing on Wednesday. Output slowed as the government cracked down on real-estate speculation, curbed credit and closed factories to meet energy-efficiency targets.

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Benchmark bounces back from biggest decline in six weeks Fund managers optimistic

Chinese banks extended 532.8 billion yuan ($78.7 billion) of new local-currency loans last month, the central bank said on its website on Wednesday. That compared with the median forecast of 600 billion yuan in a Bloomberg News survey of 23 economists. In June, the amount was 603.4 billion yuan.

M2, the broadest measure of money supply, grew 17.6 percent from a year earlier, the data showed. The economists' median forecast was 18.5 percent. In June, the gain was 18.5 percent.

Urban fixed-asset investment rose 24.9 percent in the first seven months of 2010 from a year earlier, the statistics bureau said. It compared with economists' median estimate of 25.3 percent and a 25.5 percent gain for January-through-June.

Retail sales grew an annual 17.9 percent in July, compared with 18.3 percent in the previous month, the bureau said.

Investors opened 18 percent fewer accounts to trade Chinese stocks during the week ended Aug 6 as compared with a week earlier, the China Securities Depository and Clearing Corp said on its website. Investors opened 235,175 accounts during the week, the clearing house, it said.

Bloomberg News