China’s Stock Index Futures Rise as Government Widens Yuan Band


China’s stock-index futures jumped after the government doubled the limit for the yuan’s daily moves against the dollar, underscores pledges to make the exchange rate more market based and promote freer movement of capital in and out of the country for investment purposes.

Futures on the CSI 300 Index expiring in March jumped 1.5 percent to 2,126.80 as of 9:19 a.m. local time. Anhui Conch Cement Co., the biggest maker of the building material, may advance after CCTV reported yesterday the nation will invest more than 1 trillion yuan ($163 billion) redeveloping shantytowns this year.

The Shanghai Composite dropped 0.7 percent to 2,004.34 on March 14, capping a loss of 2.6 percent last week. The index is valued at 7.4 times 12-month projected earnings, compared with the five-year average multiple of 12.15, according to data compiled by Bloomberg.

The yuan will, from today, be able to trade as much as 2 percent on either side of a daily central bank reference rate, from 1 percent previously, the People’s Bank of China said in a statement on its website on March 15. The band was last widened in April 2012 from 0.5 percent, and before that from 0.3 percent in May 2007.

“Chinese equities are becoming very very cheap,” said Evan Lucas, an IG Ltd. markets strategist in an e-mail reply to questions today. “And the with the bank widening the band – it may see extra inflows” in the medium to long term,’ he said.

The Hang Seng China Enterprises Index (HSCEI) slipped 0.3 percent on March 14, taking it down 19.5 percent from a Dec. 2 peak. The CSI 300 Index (SHSZ300) slid 0.8 percent on March 14, while the Bloomberg China-US Equity Index lost 0.1 percent.

Economic Slowdown

The Shanghai measure has fallen 5.3 percent this year amid concerns there will be more bond defaults after a solar company failed to make debt interest payments and data from manufactuing to exports signaled a slowdown.

China’s industrial-output, fixed-asset investment and retail-sales growth slowed more than estimated in the first two months of the year, data showed last week. Reports also showed the steepest slide in exports since 2009 and the slowest inflation in 13 months.

“There are too many pieces that the Chinese government is trying to keep together, but we see that they are not magicians and they can’t sustain control on all the segments of the economy,” Charles Dumas, the chairman of Lombard Street Research Ltd., a London-based consulting firm, said in an interview at Bloomberg headquarters in New York March 13. “Growth is slowing and serious reforms should be implemented to reverse the trend.”