China Reflating the Bubble: Stocks Rise Most in 3 Months on Loan

From Bloomberg:

China’s stocks rose the most in three months after new lending and money supply exceeded estimates in December, boosting speculation the government is relaxing monetary policies to bolster economic growth.

Chinese new loans totaled 640.5 billion yuan ($101 billion) last month, the highest amount since April, the People’s Bank of China said yesterday. That exceeded the estimates of all 18 economists surveyed by Bloomberg. M2, a measure of money supply, rose 13.6 percent, the fastest pace since July, it said. That compared with the 12.9 percent median of 18 estimates.

Premier Wen Jiabao called for measures to boost confidence in the nation’s stock market, the Shanghai Securities News reported today, citing his comments at the National Financial Work meeting. He urged reforming initial public offerings and improving companies’ dividend payouts, according to the report.

The premier’s comments signal the government may take more measures to boost stocks, including allowing social security funds to buy equities, David Li, UBS’s chairman and country head for China, said in an interview in Shanghai. Funds may flow out of the property market and into stocks as the government isn’t showing any inclination to ease curbs in the real-estate industry because prices “are still high,” he said.

Central bank governor Zhou Xiaochuan said yesterday the nation must be ready to combat possible shocks from Europe’s debt crisis and an uncertain U.S. economic outlook. China cut the reserve requirement for the first time since 2008 on Nov. 30 as Europe’s debt crisis eroded demand for its exports.

http://www.bloomberg.com/news/2012-01-09/china-s-stocks-rise-to-highest-level-in-2012-on-money-supply-lending-data.html