Chinese stocks rocket 5.33% amid Asian resurgence

Chinese stocks rocket 5.33% amid Asian resurgence
2007-08-20

Chinese stocks rocketed 5.33 percent amid a full-range comeback in Asian stock markets today. The comparative growth rate was the largest single-day surge since May 30.


Instead of a few heavyweights lifting the whole market up as in recent cases, today both index-drivers and smaller-cap shares surged in waves, as 1,312 of the total 1,476 A shares surged in waves to higher price levels.


Total turnover of the stocks enclosed by the major indices was 219.8 billion yuan, higher than that of last Friday.

The Shanghai Composite Index opened at 4,773.83, 117 points higher than the previous close and marched steadily all the way to a high of 4,906.00, except at a drawback point of 4,758.40 soon after the opening. Finally, it closed at 4,904.85, up 248.28 points, a new record-high close.


Of the A shares listed in Shanghai, as many as 765 went up, while only 14 dropped and 63 finished flat. Guizhou Wire Rope rose 10.04 percent to 10.41 yuan, leading another 22 stocks surging with the maximum growth cap of 10 percent on the top. Shandong Hiking International, a special treatment stock, slumped 4.94 percent on the bottom.


The Industrial and Commercial Bank of China, the largest trader both in terms of trading volume and transaction value, surged 9.75 percent to 7.09 yuan, driving the index higher to 4,900-points.


The Shenzhen Component Index, tracking the smaller Shenzhen Stock Exchange, opened higher at 16,078.84 and closed at the daily high of 16,589.80, up 900.8 points or 5.74 percent. It almost broke the previous record of 16,680.38, from August 8. The index hit its low of 16,078.84 in the morning but afterward seemed unstoppable.


Of the A shares, 546 closed up, 15 fell, and 73 finished unchanged. Twenty stocks, led by Shandong Luneng Taishan Cable, with the largest trading volume, ranked on top of the table with the maximum growth rate of 10 percent. Zhejiang Baoxiniao Garment, however, slipped over 5 percent as the biggest loser today. China Vanke, with the largest transaction value, rose 7.2 percent to 33.07 yuan.


Stocks in the mining, finance, and real estate industries were the best performers. All the mining and financial shares were up today. Most of the B shares and closed-end mutual shares also enjoyed big gains.

The Federal Reserve of the United States announced reduction of the discount rate by 0.5 percent last Friday, triggering a surge of the US stock market. The effect spilled over to the Asian countries, causing today's strong growth.


There is yet more encouraging news for the A-share market. The sub-prime loan crisis has in fact had a limited impact on the Chinese economy, Zheng Jingping, spokesman of the National Bureau of Statistics, said yesterday. This is the first time a governmental official has responded to the crisis' impact on the Chinese economy.


On the other hand, vice president of the China Securities Regulatory Commission Tu Guangshao said on the sidelines of a financial forum over the weekend that wealth management development in China requires a larger-scaled capital market.


He said the connections between wealth management and the capital market have grown more apparent and a more advanced capital market with efficient risk control mechanisms is needed. Analysts believe his comments imply that the country is aiming to encourage the development of and maintain stability in the stock market as its priority task.


The stock exchanges also stepped up efforts to better regulate the market. The Shanghai Stock Exchange (SSE) yesterday announced new rules for stock trading to prevent and curb irregularities.


The new rules, targeted mainly at "abnormal price fluctuations", are expected to curb insider trading, excessive speculation and price rigging, an SSE statement said. They will become effective from September 1.


The SSE will target stocks with limitless price fluctuation and will have the right to suspend them from trading for up to 30 minutes on a day they surge above 100 percent or drop below 50 percent of their opening prices. The rule will be used to prevent excessive speculation on newly issued and debuting stocks, SSE said.


The second new rule targets at curbing insider trading. The SSE will have the right to suspend the trading of stocks that surge or drop dramatically for two consecutive days and if more than 30 percent of their total daily turnover comes from one branch office of a securities company. The stocks can only resume trading at 10:30 a.m. on the day a company makes a formal clarification.


The third rule will be used to curb investors' excessive speculation on penny worth stocks, the SSE said. Special treatment stocks, which are allowed a 5 percent daily fluctuation, can be suspended from trading if they reach the daily limit at close for three consecutive days.