Stocks rocket 3.73%, regain 4,000-point ground

Stocks rocket 3.73%, regain 4,000-point ground

2007-07-20

Chinese stocks shrugged off worries of tightening monetary policyies and marched strongly upward today to take back the 4,000-point critical barrier lost in aftermath of the May 30 stamp tax hike.

Analysts said better growth prospects in a few industries, reflected by the first half-year statistics, weakened the fear for the expected tightening measures and investor confidence might have returned to some extend to drive the whole market up today.

The Shanghai Composite Index closed at 4,058.85, up 145.91 points or 3.73 percent, the largest single-day surge since May 30.
Total turnover of stocks enclosed by the two major indices was 157.2 billion yuan, the second largest this month after July 9, when the stock prices grew 2.69 percent that day.

Opening higher at 3,918.41, the benchmark index surged upward in waves, expect for a few setbacks, none of which were deep enough to reverse the trend or return it to the opening level. It finished on the peak of the waves, just a little down than the highest of 4,062.12.
Of the A shares listed in Shanghai, as many as 788 went up, only eight dropped and 44 ended unchanged. Jilin Wuhua Group rose 10.09 percent to 6.44 yuan on top of the gainer's list, followed by Gansu Yasheng Industrial Group and Wuhan Xianglong Power Industry, both sealed at the maximum growth cap of 10 percent. Loss-making ST stocks, took up six places on the bottom, with Xiamen Eagle Group losing largest proportion of its share price.
Banks ranked on top of the largest traders' list. The Industrial and Commercial Bank of China, with the biggest trading volume, added up 0.17 yuan while China Minsheng Banking Corp, with the largest transaction value, surged 6.5 percent. Bank of Nanjing following China Minsheng, on its second trading day, with a 4.9 percent rise on top of yesterday's 72 percent surge.

The Shenzhen Component Index, tracking the smaller Shenzhen Stock Exchange, ended at 13,417.96, up 627.02 point or 4.9 percent. Opening lower from at 12,786.61, it went through the day within a range of 12,775.15 to 13,420.04.
Of the A shares, only nine were down while 547 went up and 62 closed flat. Guangdong Rosen Super Micro-Wire rocketed 197.88 percent to 25.35 yuan on its debut, followed by another new stock Sichuan Gaojin Food with a 196 percent rise. Loss-making Stone Group High-Tech dropped 5 percent to lead the fall by few.
Real estate shares were best performers. All of the more than 50 stocks surged, led by Dongguan Winnerway Industrial Zone with a 10 percent rise and China Vanke, the largest trader in Shenzhen, climbing 10 percent and lifting the index up. Stocks in the retail and wholesale, service, and financial industries were also strong.
B shares went up. Of the 109 listed B shares, only one went down and three ended unchanged. Closed-end mutual funds gained on their remarkable second-quarter results published today, with both the fund indices up over 3.5 percent.


According to the National Bureau of Statistics (NBS) yesterday, China's gross domestic product (GDP) grew 11.5 percent to 10,676.8 billion yuan in the first half. The growth rate was 0.5 percentage points higher than that of the same period last year. GDP growth for the second quarter hit 11.9 percent, the highest in 12 years. Trade surplus was 112.5 billion yuan for the first half.
On the other hand, the consumer price index (CPI), a key indicator of inflation, rose 4.4 percent last month, the highest in 33 months. For the first half, CPI rose 3.2 percent, higher than the 3 percent alert line set by the central bank. Food price was the largest inflationary pressure, contributing to 2.5 percent of the total, said NBS. Analysts believe the central bank may raise interest rates again this month to curb excessive liquidity and cool down the investment wave.
Analysts pinned down three growth sectors upon the first half macro economic data. They believe investment opportunities will emerge in the retail and consumer goods, machinery and steel industries.
In the first half, average disposable income of urban residents rose 14.2 percent after deduction of price fluctuation factors to 7,052 yuan. The growth rate was 4 percentage points higher than that of the same period last year. The direct effect of the increase in disposable income will be stipulation of consumption, said economists.
As a result, the retail and wholesale index bypassed previous records yesterday, when the market was still in intensive price adjustments.
For the machinery sector, the national added value rose 18.5 percent on a fast growth path in the first half year. For the steel industry, the total profit reached 902.6 billion yuan, up 42.1 percent. The speed for growth was 16.6 percentage points faster than that of last year.
Securities houses including CITIC, Guoxin and China Merchants, and mututal funds are currently recommending or buying in the stocks in the three sectors. Investors may also gain from following suit, said analysts.
This also accords with the hefty profits of mutual funds, the largest investors in the second quarter. China's 323 mutual funds earned a combined 221.31 billion yuan in the second quarter, up 51.6 percent from the first quarter as a new quarterly record. Their investment directors were on stocks in the finance, real estate, machinery and mining sectors, according to industrial statistics.
There is news for the long-awaited index futures: chief of the research and development department of the Shanghai Financial Futures Exchange said that the timetable for the launch of China's first financial futures based on the CSI 300 index might be released earlier than the original schedule. Such a plan aims to help the market digest the information in advance, said Zhang.
On the other hand, sources revealed that the Ministry of Finance will issue the first batch of the special treasury bonds worth of 850 billion yuan. Upon exchanging US dollar reserves for the bonds, the central bank may be sold to the Agricultural Bank of China through asset disposal.