China Stock indices break all-time records

China Stock indices break all-time records
2007-08-03

Driven by large-cap financial shares, Chinese stocks leaped higher today, with both major indices breaking all-time records.

The Shanghai Composite Index closed at 4,560.77, up 153.04 points or 3.47 percent from yesterday, higher both than its previous highest close, seen on July 31, and its highest point ever, on August 1.

Total turnover of the stocks in the major indices was 266.9 billion yuan, higher than yesterday.

Opening higher from 4,440.98, the benchmark Shanghai index formed a strong upward trend and its growth accelerated in the afternoon session. After touching the lowest 4,438.96 soon after the opening, it went up to close just under the highest 4,562.69.

Of the A shares listed in Shanghai, 493 went up, 282 closed down, and 67 ended flat. Changchun Gas gained 10.05 percent to the top of the list, followed by Xinjiang Talimu Agriculture Development and Fortune NG Fung Food (Hebei), both whom also sealed the maximum growth cap of 10 percent. Shanghai East China Computer, however, lost 7.6 percent to occupy the bottom.

The Industrial and Commercial Bank of China, the largest trader in terms of trading volume, gained 4.3 percent, rare for China's largest commercial bank with 9 billion floating A shares. China Minsheng Banking Corp, with the largest transaction value, rose 8.5 percent to 15.16 yuan, followed by CITIC Securities on the same list, with a nearly 10 percent surge to 71.95 yuan.


The Shenzhen Component Index, tracking the smaller Shenzhen Stock Exchange, closed at 16,179.64, 617.5 points or 3.97 percent higher than the previous closing. Opening higher from 15,699.74, it went through the day within a range from 15,699.74 to 16,194.04, both higher than yesterday's closing level.

Of the A shares, 369 closed up, 174 down and 77 were unchanged. Riding on the surging waves, Zhejiang Hongda Warp Knitting rocketed 538 percent to 34.65 yuan on its first trading day. Another new share, CNNC Huayuan Titantium Dioxide saw its share price growing five times from the initial issuing price. Hubei Sanonda, on the other side, was down 7.6 percent as the biggest loser.

Besides sfinancial shares, stocks in the real estate, mining and retail and wholesale sectors were particularly strong. Real estate developer China Vanke, the largest trader both in terms of trading volume and transaction value, gained 7.6 percent to 33.8 yuan to lift the Shenzhen index up. Beijing Air Port High-Tech Park rose 10 percent to pioneer the surges by reality shares.

Closed-end mutual funds listed on the exchanges were up, with both the indices rising over 2.5 percent. B shares finished mixed, with 44 out of the total 109 B shares gaining from higher prices today.

Recovering from a month and half-long sluggish performance since May 30, the stock market seemed to have started another round of surges to higher grounds recently, which largely brought back investor confidence. The new A share account opening returned to the above 100,000 level since last Monday and remained on that level. This Monday, it hit 163,451, the highest in a month.

In addition, a survey by the China Securities Association showed that 60 percent of investors are optimistic about the performance in the remaining months this year.

However, the survey also concluded that individual investors are inclined to make irrational decisions against their risk-aversion attitudes.

On one hand, over 60 percent of individual investors said they prefer long-term, stable returns and are tolerant to 20 percent loss at most. On the other side, however, more than half of the investors have mostly made short-run speculations by selling stocks in less than three months after purchase, implying their longing for faster and higher profit margins accompanied with higher risks.

Amateur investors are dwarfed in their investment scales. The survey found 70 percent of the personal investors have less than 500,000 yuan in their stock accounts, and one fourth of the total have less than 100,000 yuan.

It is also worth of noting that 70 percent of them use over one third of their family wealth in the stock market while 13.4 percent of the total put all their savings in the market. Of the "veteran" investors with more than a year experience, 8.3 percent borrow money from others or banks to invest in stocks; of the new comers, and 10.8 percent use borrowed funds.

Analysts believe the results showed that individual investors are vulnerable to stock price fluctuations for their lack of funds and knowledge about the market, risk awareness and control ability, and high proportions of personal wealth. The regulators must protect these investors at all cost, experts said. Strict regulation and close supervision over the market, more education to the individual investors, and establishment of investor protection schemes are among the many that are needed stress the problem, they believed.
At the same time, the banking regulator is keeping a close eye on illegal funds flowing to the stock market. The commission has been always vigilant on bank loans entering the market and will continue focusing on preventing such behavior, said Hao Aiqun, director of the first supervision division of the China Banking Regulatory Commission yesterday.
In June, the regulator punished eight branches of commercial banks convicted of misappropriation of loans to invest in the stocks and days ago, it warned two State-owned enterprises for their illicit investment in the stock and real estate markets.