Major indices break all-time high record

Major indices break all-time high record
2007-07-26

Major stock indices in the bourses of Shanghai and Shenzhen both topped their all-time highs on Thursday and consolidated gains amid rosy corporate earning prospect reports and continuing reminbi appreciation.

Shanghai Composite index


Continuing Wednesday's enthusiasm, the key Shanghai Composite Index broke the May 29 record of 4335.96 quickly with an exciting opening of 4347.78, 23 points higher than last day's close. In spite of a series of fluctuations due to investors' apprehensiveness and profit-taking funds, the index managed to close at historical 4346.46 high, with a slight increase of 0.52 percent.

The Shenzhen Component Index, however, did not break its record high by only a narrow margin in the morning session, saving strength for an afternoon charge. The index reached its peak of 14703 around 2 PM and ended at 14619.74, the highest close ever.

Shenzhen Component Index


Robust corporate earnings served as the major driving force behind the bullish market. According to the interim report of 80 listed firms available now, their average profits surged a stunning 82.4 percent. Behind that is the booming Chinese economy as well as huge investment income from the flourishing stock market itself. Haitong Securities half year-profit, for example, expanded 853.15 percent from a year earlier mainly from the huge brokerage commissions and securities investment.
In addition, shares with lower trading prices, most of which suffered from a cruel 50-percent off in previous correction, began to revenge with one limit-up after another. Stocks of firms like Hainan Yedao and Greenview Property have surged 50 percent or more since early this month.

According to data from the exchanges, the total market value of Chinese mainland's stock market reached 19.13 trillion yuan after Wednesday's close and is expected to expand more with the inauguration of new index records today.

However, dealers are still cautious in the midst of the new highs. Some are worried that the forthcoming return of red-chip giants and regulators' persistent concerns about liquidity may prohibit the index from surging too far. They also advised investors to examine their portfolios carefully and prepare for more consolidation of the market taking on additional risks.

SHANGHAI, China - China's roller-coaster stock markets surged to a new high Thursday, boosted by expectations of stronger corporate profits despite government efforts to cool the sizzling economy.

The benchmark Shanghai Composite Index rose 22.49 points, or 0.52 percent, to close at 4,346.46, breaking its previous record set May 29. The Shenzhen Composite Index for the country's second, smaller market rose 1.5 percent to 1,231.65.

The Shanghai index has risen more than 62 percent so far this year and 14 percent since the start of July after more than doubling in 2006.

But the market has taken investors on a wild ride as regulators tried to rein in a boom that has drawn a flood of new money into stocks.

After the Shanghai index hit a then-record of 4,334.92 on May 29, the market plunged after regulators raised a trading tax the following day. The index fell 15 percent before climbing back up to the current level.

It also plunged in late February, only to bounce back within a few weeks.

Thousands of first-time Chinese investors have poured into the markets in recent months, tapping savings and mortgaging their homes to buy stocks in hopes of getting a better return in an economy that offers few other investment opportunities.

Investors have been upbeat about corporate earnings despite repeated government efforts to contain China's surging economy, which expanded by 11.9 percent last quarter, its fastest quarterly growth since 1995.

The government raised interest rates Friday for the fifth time since April 2006. It is trying to restrain the growth of exports and investment, worried that runaway spending in some industries could push up inflation or ignite a debt crisis.

"The government is waiting to see the outcome of those policies on the real economy as well as on the financial markets," said Grace Ng, a J.P. Morgan economist in Hong Kong.

Gainers on Thursday included China Southern Airlines, China's biggest carrier, which rose 0.8 percent. The airline said Wednesday it expects to post a profit for the first half, following a loss in the year-earlier period. China Southern's shares have risen more than 40 percent over the past seven trading sessions.

"Investors bought equities heavily after a number of companies issued rosy forecasts for their first-half earnings. But significant rises in stock prices have been eating up potential gains," said Zhang Yuheng, an analyst at CSC International Holdings.

Automaker Dongfeng Automobile Co. rose 5.5 percent while Citic Securities was up 5.1 percent.

Markets rallied despite a government decision to make keeping money in the bank more attractive by raising interest rates on deposits and cutting tax paid on them.