China's main stock index jumped over 4 percent on Wednesday in a broad rally led by oil companies, as hopes grew that the market might finally have found a floor after a six-month slide. The Shanghai Composite Index fell as much as 1.84 percent in early trade but closed 4.15 percent higher at 3,278.330 points, near an intra-day high of 3,296.717.
On Tuesday the index dipped below 3,000 points for the first time in 13 months, bringing its losses from last October's peak to 51 percent. But it then began rebounding from near major chart support at 2,956 points, the 61.8 percent retracement of its bull run from mid-2005.
Rising stocks in Shanghai overwhelmed losers by 865 to 24 on Wednesday, while turnover in Shanghai A shares jumped to a two-week high of 85.7 billion yuan ($12.3 billion) from Tuesday's 58.6 billion. Many fund managers and analysts said high inflation and the threat of an economic slowdown later this year meant the market was unlikely to start a major bull run.
But they said blue chip valuations might have dropped far enough to attract fresh buying, while there were signs that regulators did not want to see a further drop below 3,000 points.
The average premium of domestically listed A shares over Hong Kong-listed H shares shrank as far as 28 percent this week, its lowest level since last July, from a peak of 113 percent in January this year. Analysts think appreciation of the yuan and the closed nature of China's capital markets may support the existence of some premium.
Meanwhile, there were signs this week that regulators finally wanted to halt the market's slide. The securities regulator announced restrictions on large sales of shares freed up by the expiry of lock-up periods, and fund managers said the regulator had asked some funds not to cut equity allocations.
The index faces initial technical resistance on its 20-day average, now at 3,379 points, which halted a rally in early April. The charts suggest an extended recovery might test the 4,000-point area, the 38.2 percent retracement of the market's tumble from mid-January. Sinopec, Asia's largest oil refiner, shot up 6.46 percent to 10.88 yuan and PetroChina, the biggest stock in the index, gained 3.19 percent to 16.52 yuan.
Property stocks, which had slumped in the past week because of concern about the outlook for home prices, jumped after the National Development and Reform Commission predicted upward pressure on prices would increase in the second quarter. Gemdale gained 7.85 percent to 13.33 yuan.
Jiangxi Copper, China's top integrated copper producer, surged its 10 percent its daily limit to 27.41 yuan after reporting a 46 percent jump in first-quarter profit.
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