Subdued Inflation, Lending Surge in China

Mayank Mehta
11 Feb, 2010
New York City

China home prices soared 9.5% in January and lending surged to $202 billion, 14% lower than a year ago but higher than the total in the fourth quarter 2009. Mainland China inflation in the month was 1.5%, lower than expected. Stocks gained after lower than inflation and a decline in M2 money supply.

[R]8:30 PM Hong Kong, China – China home prices increased 9.5% in January an lending surged to $202 billion, 14% lower than a year ago but higher than the total in the fourth quarter 2009. Mainland China inflation in the month was 1.5%, lower than expected. Stocks surged after lower than inflation and a decline in M2 money supply growth.[/R]

Stocks in Shanghai and Hong Kong advanced after the consumer price index increased at a slower pace and M2 money supply growth slowed to 26%.

Inflation increased 1.5% in January according to the latest data released by the statistics bureau today.

Bank lending in China in January soared to 1.39 trillion yuan ($202 billion) more than the lending in the previous three months to December combined according to the People’s Bank of China today.

Lending is 14% lower from a year ago month as China curbs new lending to arrest speculation in real estate prices. Record lending in 2009 of 9.6 trillion yuan forced central bank to cut new loans this year and set a target of 22% lower lending of 7.5 trillion yuan.

Property prices 70 largest cities in January increased 9.5% in the month from a year ago according to the National Development and Reform Commission today.

Hang Seng index in Hong Kong increased 368.47 or 1.85% to 20,290.69, and CSI 300 index in China higher 6.27 or 0.20% to 3,220.40.

Producer prices index, a measure of wholesale price inflation increased 4.3% in January from a year ago and M2 money supply growth decreased to 26% according to the latest data release by the statistics bureau today. M1 money supply surged 39% in the month that may presage higher inflation ahead.

The central bank in its quarterly policy review also said that it will unwind additional stimulus measures in “gradually” back to normal levels.

Shanghai Movers

Steelmakers, home builders and banks led the gainers in trading today.

Angang Steel Co. increased 3.2% to 12.11 yuan, Baoshan Steel increased 5.7% to 7.83 yuan and Hebei Steel gained 2.7% to 5.74 yuan.

China Vanke increased 0.8% to 9.28 yuan, Poly Real Estate gained 1.6% to 19.36 yuan and Gemdale added 2.3% to 2.17 yuan.

Inner Mongolia Baotou Steel Rare-earth Hi-Tech Co. gained 5.4% to 25.44 yuan after the government approved the setting up of international trading division of rare earth materials for the company.

HK Movers

The Bank of East Asia Limited rose 2.8% to HK$27.45 after the full year net increased HK$2.57 billion and bad loan losses increased 20% to HK$1.1 billion in the year 2009.

Cathay Pacific Airways Limited rose 3.3% to HK$13.72 after the airline was to “buy” from “underperform” at Bank of America Merrill Lynch Research.

China Shenhua Energy Company Limited the coal producer added 2.6% to HK$33.10.

China Overseas Land & Investment Limited advanced 2.4% to HK$14.82 after the developer controlled by the country’s construction ministry announced that its property sales surged 241.4% year on year to HK$4.1 billion in January.

CITIC Pacific Ltd the state-owned investment company gained 5.2% to HK$17.16.

Shimao Property Holdings Limited added 2.8% to HK$12.16 after the developer sold 210,000 square meters of properties for a total of RMB 3.3 billion last year.

Sinotrans Shipping Limited rose 3.7% to HK$3.63 after the dry-bulk operator rating was increased to “outperform” from “neutral” at Macquarie Group Ltd.