China Stocks Gain; 23% Loans Default Worries

Chandrasekhar Atreya
26 Jul, 2010
New York City

Stocks in China region rallied after investor sentiment gained on improving global economic outlook. Banks in China may struggle to recoup about 23% of the 7.7 trillion yaun loans for local infrastructure projects. Trading of Zijin Mining stocks have been suspended in Hong Kong and Shanghai.

[R]5:00 PM Hong Kong, China – Stocks in China region rallied after investor sentiment gained on improving global economic outlook. Banks in China may struggle to recoup about 23% of the 7.7 trillion yaun loans for local infrastructure projects. Trading of Zijin Mining stocks have been suspended in Hong Kong and Shanghai.[/R]

China stocks advanced today after stress test results of European banks eased investor concerns. The stocks gained for the sixth day today. Stocks in Hong Kong rallied after positive U.S. earnings outlook boosted investor sentiments.

CSI 300 Index gained 0.64% or 17.98 to close at 2,811.05. The Hang Seng Index gained 0.12% or 24.58 to close at 20,839.91.

Better balancing of trade and international payments will help the nation realize stable and orderly growth of money supply, a central bank official said.

Moderate yuan adjustments can ease pressure from the inflows of foreign exchange and ease the rapid growth of the nation’s reserves. Moderate yuan moves can help adjust trade and payment imbalances, said Hu Xiaolian, a Deputy Governor at the People’s Bank of China, said in a statement posted on the central bank’s Web site today.

Demand for electricity in China is expected to slow down in the second half of the year as compared to the first half after curbs have been put on energy-intensive and polluting industries, the China Electricity Council said.

Electricity consumption may rise about 12% to 4.1 trillion kilowatt hours this year. Demand surged 22% in the first half of the year, the council said in its statement posted on its Web site today.

Banks in China may struggle to recoup about 23% of the 7.7 trillion yaun they have lent to finance local infrastructure projects, according to data complied by the nation’s banking regulator, the China Banking Regulatory Commission.

The Commission’s Chairman Liu Minkang said last week borrowing by the so-called local government financing vehicles may threaten the banking industry. The local governments set up these financing vehicles to fund projects due to limits on their ability to borrow money directly.

Trading of Zijin Mining Group’s shares were suspended in Shanghai and Hong Kong according to statements posted on the two stock exchanges. The gold producing Chinese company was forced to shut its copper plant in Fujian province after leak of acid waste poisoned several tons of fish in the Ting River.

China’s Minerals and Metals Group has reported a jump in quarterly zinc and lead production and says it is on track to meet its annual production target, attributing the improved performance to solid output at its Century mine in Queensland and a planned zinc campaign at its Golden Grove mine in Western Australia.

MMG said it produced 178,979 tons of zinc metal in concentrate in the quarter to June 30, up 28% from the previous quarter. Lead production in the quarter was 12,851 tons in concentrate form, up 50% from the previous quarter, the company said in a statement today.

The steel unit of Japan’s JFE Holdings Inc, said it agreed to buy a 24% stake in a steel pipe making company to expand its presence in China.

Chengdu-based Panchen Yihong Pipe Co, a joint venture between PanGang Group Chengdu Steel & Vanadium Co and Marubeni-Itochu Steel Inc, will become an affiliate of JFE Steel, the Tokyo-based company said in a statement.

Shanghai Stock Movers

China South Locomotive gained 1.1% to 5.41 yuan after its unit won a contract for 4 billion yuan Malaysia’s Transport Ministry.

Hainan Airlines Co rose 0.9% to 5.95 yuan after it said first half profit may rise more than 100% due to higher domestic demand.

Bank of China Ltd dropped 0.3% to 3.56 yuan and Agricultural Bank of China lost 0.4% to 2.80 yuan.

Huaxin Cement Co lost 1.5% to 17.08 yuan and Laiwu Steel Corp also lost 1.5% to 8.93 yuan.