China's Stocks Advance on Gains in Commodity Prices, Fed Easing Outlook

China’s stocks rose, led by energy and material companies, on gains in commodity prices and after U.S. Federal Reserve Chairman Ben S. Bernanke said the Fed may buy more Treasuries to boost growth.

Jiangxi Copper Co. paced an advance for metal producers after Macquarie Group Ltd. said the nation’s overall copper demand may rise in 2011. PetroChina Co. climbed more than 1 percent, leading energy companies higher, after Bernanke said Fed purchases of Treasury securities beyond the $600 billion announced last month are possible. SAIC Motor Corp. paced losses for automakers after the China Securities Journal reported China will end preferential treatment for some vehicles.

“The Fed’s remarks on further quantitative easing will help commodity prices,” said Wu Kan, Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, advanced 12.04 points, or 0.4 percent, to 2,854.47 at 10:06 a.m. The CSI 300 Index added 0.4 percent to 3,171.16.

Bernanke and other Fed officials have defended the central bank’s announcement that it will purchase $75 billion in Treasury securities a month through June to prop up a recovery so weak that only 39,000 jobs were created in November.

The purchase of more bonds than planned is “certainly possible,” said Bernanke. “It depends on the efficacy of the program” and the outlook for inflation and the economy.

In China, an early interest-rate increase would be good for stocks as it reduces the risk of policy over-tightening in the future, according to China International Capital Corp.

CICC would be more cautious about the stock market outlook in the first half of next year if the central bank were to not raise borrowing costs before the end of the year, analysts led by Hou Zhenhai wrote in a note dated yesterday.

Copper Demand

A gauge of material stocks in the CSI 300 surged 1.2 percent, as investors bought shares of commodity producers as a hedge against inflation. Jiangxi Copper Co., China’s biggest maker of the metal, gained 1.5 percent to 36.62 yuan. Tongling Nonferrous Metals Group Co. jumped 4.2 percent to 27.46 yuan.

China’s spending on a national power grid may account for 50 percent of the increase in the country’s overall copper demand next year, Macquarie said.

The nation’s overall copper demand is forecast to rise to 7.74 million tons next year, while the national grid copper usage may rise from at least 700,000 tons to over 1 million tons, Macquarie analyst Max Layton wrote in a report. Aluminum demand from the national grid may rise by 500,000 to 1 million tons next year to 2.5 million or 3 million tons, he wrote.

Copper in London climbed for a fifth day, set for its longest rally since July. The metal for three-month delivery on the London Metal Exchange rose as much as 0.5 percent to $8,765 a metric ton by 9:02 a.m. Singapore time.