China Policy ‘Fine-Tuning’ May Spark Rally: Citi
By Bloomberg News - Oct 27, 2011
China’s policy “fine-tuning” has supported a rebound in the nation’s stocks and may spark a year-end rally, Citigroup Inc. (C) said.
Investors should buy stocks that rely on China’s economic expansion including Jiangxi Copper Co. and Ping An Insurance Group Co. after Premier Wen Jiabao announced this week the government will fine-tune policies at an “appropriate time,” Shen Minggao, the Hong Kong-based head of China research at Citigroup, said in a report today.
“More catalysts in policy and fundamentals are possible to lay a solid footing for a year-end rally,” Shen said. “There is more upside than downside going forward. The market momentum may carry on in the near term.”
The Shanghai Composite Index, China’s benchmark measure, rallied for a fifth day and was set for the biggest weekly advance in a year. The stocks gauge climbed 1.4 percent to 2,470.72 at 9:39 a.m. local time. The Hang Seng China Enterprises Index of Chinese stocks listed in Hong Kong added 3.3 percent today, extending an 18 percent rally this week.
Citigroup joined UBS AG (UBSN) and Barclays Plc in predicting a policy easing after Premier Wen signaled the government is poised to end a two-year monetary tightening campaign as inflation slows and economic growth decelerates.
China’s inflation rate eased to 6.1 percent in September from a three-year high of 6.5 percent in July. The economy grew 9.1 percent in the third quarter, the least in nine quarters.
It’s a good time to be “less defensive” in Chinese stocks, UBS strategist John Tang said in a note yesterday. UBS boosted its rating for consumer discretionary stocks to“overweight” and upgraded the construction, machinery and shipping industries to “neutral’ from ‘‘underweight.’’
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