Equities rise on Wen's economic policy comments

SHANGHAI - Stocks on the Chinese mainland rose for a third day after Premier Wen Jiabao said the government will fine-tune its economic policies as needed, boosting speculation the central bank may halt interest-rate increases.

Developers China Vanke Co and Poly Real Estate Group Co jumped at least 3.5 percent after Wen said officials will make adjustments at a "suitable time and by an appropriate degree" and Guotai Junan Securities Co said the central bank might cut borrowing costs.

Anhui Conch Cement Co surged to the highest in two months after profit more than doubled.

"The market interprets Wen's comment as an inflection point for policy changes," said Zhang Ling, general manager at Shanghai River Fund Management Co. "It'll definitely provide a boost to stocks. Consumption and new industries may be areas that may have the government's financial support."

The Shanghai Composite Index climbed 0.7 percent to 2427.48, capping a three-day, 4.8 percent gain. The CSI 300 Index rose 1 percent to 2651.65.

The Shanghai Composite has slumped 14 percent this year after the central bank raised interest rates three times in 2011 and ordered lenders to set aside a bigger portion of their deposits to curb inflation that's near a three-year high.

The Shanghai index is valued at 11.3 times estimated earnings, compared with a record low of 10.8 times on Oct 21, according to weekly data compiled by Bloomberg.

Officials will make adjustments at a "suitable time and by an appropriate degree" and maintain "reasonable" growth in money supply, Wen said during a visit to Tianjin, according to a statement published late on Tuesday on the government's website.

The government will continue to make tackling inflation a top priority, Wen said.

China may lower the reserve-requirement ratio for small and medium-size banks before the year-end and cut interest rates in the second quarter next year after Wen said on Tuesday the government may fine-tune economic policies, according to Guotai Junan Securities Co Ltd.

The premier's comments reflect the government's concern about slowing economic growth, Wang Jin, an analyst at the Shanghai-based brokerage, wrote in a report on Wednesday.

The Ministry of Industry and Information Technology and other government agencies will work to help small businesses facing difficulties, it said in a statement on Wednesday.

A measure tracking 34 property stocks climbed 2.1 percent on Wednesday, the biggest gain among the Shanghai Composite's five industry groups.

The government hasn't raised interest rates since July, after five increases in less than a year to curb price gains that have exceeded the 2011 target every month. The pause since the last rise is the longest since the increases began.

Bloomberg News