China's stock market, reopening after a week-long holiday, rose on Monday and outperformed the region after Premier Wen Jiabao said he saw signs of recovery in the Chinese economy. "During the last 10 days of December it started to get better. The goods piled up in port started to decrease and the price of industrial products started to rise," Wen said in London on Sunday.
Also, the commerce ministry said on Saturday that Chinese consumer-spending rose strongly in the weeklong holiday period, climbing an estimated 13.8 percent from the equivalent holiday week in 2008. "Premier Wen's fairly positive comments about the economy have strengthened investors' confidence," said Zao Xuefeng, analyst at Huaxi Securities.
"January economic data may be better than December data, so the outlook for the news flow is not bad." The Shanghai Composite Index ended up 1.06 percent at 2,011.683 points, outperforming the MSCI index for Asia-Pacific stocks outside Japan, which was down more than 2 percent.
Gaining Shanghai A shares outnumbered falling stocks by 847 to 80. Turnover in Shanghai A shares was a moderate 61.7 billion yuan ($9.0 billion), little changed from 62.7 billion yuan on January 23, the last day before the holiday. However, analysts said it was not clear that the market was starting any kind of extended uptrend. The index has failed to break above 2,000 points on a sustained basis since last November.
Although Wen said a monthly record of 900, billion yuan in aggregate loans was added to the economy in the first 20 days of January. As Beijing encouraged banks to boost lending, loans surged to state projects in China's economic stimulus package; rapid growth may not be sustainable, especially as lending to the export sector and smaller firms appears to remain weak.
The rise in holiday retail sales may have been exaggerated by the fact that fierce snowstorms disrupted consumer spending in the year-earlier period. And a survey by brokerage CLSA on Monday, suggested the manufacturing sector may not have started recovering; CLSA's Purchasing Managers' Index rose to a seasonally adjusted 42.2 in January from 41.2 in December, inching further from a record low of 40.9, in November but staying well below a neutral line of 50.
"The fact that the PMI has bottomed is encouraging but should not be taken as evidence of recovery. All activity and demand indices remain well below the 50 break-even line - pointing to a substantial month-on-month contraction in manufacturing activity," said Eric Fishwick, head of economic research at CLSA.
AGRICULTURAL SHARES: Many agricultural shares were strong on Monday after the government said it would provide price support, farmland protection and curbs on imports to shore up rural incomes during the economic slowdown.
Xinjiang Guannong Fruit & Antler Co rose 3.06 percent to 35.76 yuan, while Shenzhen Agricultural Products jumped 4.82 percent to 14.34 yuan. Zijin Mining Group soared its 10 percent daily limit to 5.53 yuan after global gold prices rose sharply during the Chinese holiday week, though they fell back a bit on Monday.
Xi'an Aircraft International Corp climbed 7.10 percent to 16.74 yuan after a person familiar with the deal told Reuters that the company would sign a parts manufacturing agreement with Airbus on Monday. Coal shares underperformed after softness in global energy prices during China's holiday break. Yanzhou Coal sank 1.86 percent to 10.03 yuan, despite announcing a plan to buy back up to 10 percent of its Hong Kong-listed H shares. Shanghai Petrochemical dropped 0.54 percent to 5.51 yuan after saying it had still not won shareholder approval for reform of its state shareholding structure, and would not submit a fresh proposal for at least one month.
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