Chinese shares higher, investors hot on banks

China's shares closed two percent higher on Wednesday, buoyed by solid gains in bank stocks on news that China's Big Four state lenders could issue nearly $36 billion in subordinated bonds to boost their capital base.
Confirmed and suspected outbreaks of deadly bird flu in 12 of China's provinces, regions and major cities were largely ignored as investors clung to the belief that the disease was not highly contagious among humans, analysts said.
The benchmark Shanghai composite index, grouping hard currency B shares and yuan-denominated A shares, rose 2.18 percent to 1,685.159 points.
The four state-owned banks can float the bonds as early as the first quarter of 2004 to improve capital adequacy ratios, the China Daily reported on Wednesday.
Three of China's five listed lenders topped the list of the day's most active counters. Brokers said buying interest in banks had been strong since the country's cabinet pledge to overhaul capital markets issued on Monday.
The Shanghai market has surged 28 percent since hitting a four-and-a-half-year low in mid-November. Analysts predicted the index to test the psychologically crucial 1,700 point level soon.
"With policy support, market sentiment should remain strong and maintain this upward momentum in the near term," said analyst Wu Ang of CITIC Securities.
In December, the banking regulator issued rules allowing domestic banks to re-capitalise by issuing subordinated bonds - debt that ranks only above equity if a company is wound up.
China's sole private lender, Minsheng Banking Corp, jumped 3.2 percent to 11.98 yuan. The mainland lender said Wednesday it had won regulatory approval to open an office in Hong Kong that could extend its global reach.
Huaxia Bank said last month it planned to issue 4.25 billion yuan ($513.4 million) in subordinated bonds to boost capital, the first listed lender to jump on the fledgling plan.
Its shares rose 2.66 percent to 8.50 yuan, and China Merchants Bank gained two percent to 12.34 yuan. A buying spree amid other large-caps like Yangtze Electric Power also extended the market's rally.
Yangtze Electric, which runs the Three Gorges project, world's largest hydropower undertaking, jumped 6.5 percent to 9.80 yuan.