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Bank loans boost stocks

Updated: 2011-11-15 10:12

By Weiyi Lim (China Daily)

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SINGAPORE - Stocks on the Chinese mainland rose the most in three weeks on Monday. The advance came as investors speculated that the government is relaxing lending curbs to stem an economic slowdown and as lower food prices gave policymakers leeway to ease monetary policy.

China Construction Bank Corp and Poly Real Estate Group Co led gains for financial companies after Chinese banks' October new loans jumped by the most since June and prices for marbled pork meat fell 2.5 percent this month. BYD Co jumped 10 percent as Xinhua News Agency reported China will remove restrictions on new license plates for buyers of new-energy vehicles.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, rose 1.9 percent to 2528.71 at the close, the most since Oct 24. The CSI 300 added 2.1 percent.

"There's a lot of good news for stocks on Monday; bank loans exceeding expectations is a positive sign as it shows the government may be relaxing curbs and November loans should see a similar trend," said Li Jun, a strategist at Central China Securities Co in Shanghai. "The new development in Europe is definitely positive. A lot of attention is placed on its problems, so any relief will mean an upside for stocks in the near-term."

Consumer price gains slowed to 5.5 percent in October from 6.5 percent in July, giving the government greater scope to unwind monetary tightening as Europe's debt crisis and a US slowdown hurt exports.

Prices in China for marbled pork meat fell 2.5 percent to 29.03 yuan ($4.6) a kilogram from Nov 1 to 10 compared with the previous 10 days, the National Bureau of Statistics said in a statement on its website.

A gauge of financial companies in the CSI 300 including banks, insurers and developers jumped 1.8 percent.

China's banks made 586.8 billion yuan in new loans available last month, exceeding September's 470 billion yuan and all 18 estimates in a Bloomberg survey, signaling China may be loosening credit limits to sustain growth amid the European debt crisis. The report was released by the central bank on Friday after the market close.

"The readings are overall positive to market sentiment as the data confirmed market expectations for a looser liquidity condition since October," Ting Lu, a Hong Kong-based economist at Bank of America Corp wrote in a note last Friday. "As inflation worries ease and global macro uncertainties rise, the room for fine tuning of monetary tightening is getting bigger."

Over the weekend, International Monetary Fund Deputy Managing Director Zhu Min and National Economic Research Institute Director Fan Gang, said China's economy was heading for a "soft landing" as growth slows.

Bloomberg News

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