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Chinas share market rose sharply in expanding turnover on Tuesday, led by resource stocks after global copper prices surged and oil rebounded. A rumour that bank reserve ratios might be cut aided property stocks. The Shanghai Composite Index, which gained 1.15 percent on Monday on the back of strong banking stocks, closed up 3.02 percent at 2,218.326 points, after hitting a high of 2,225.192.
Turnover in Shanghai A shares rocketed to a heavy 111.9 billion yuan ($16.4 billion) from 61.2 billion yuan on Monday, when it hit its lowest level since late January. Gaining Shanghai A shares far outnumbered losers by 944 to two. Jiangxi Copper and Western Mining both soared their 10 percent daily limits. Leading coal producer Shenhua Energy climbed 4.23 percent to 19.70 yuan.
Among real estate developers, Vanke rose 5.96 percent to 8.36 yuan. Some traders attributed the strength in property and other stocks partly to a rumour that the central bank might soon cut bank reserve ratios to stimulate lending; a reporter for the official China Securities Journal wrote in an analysis on Tuesday that recent drains in the central banks money market operations were probably in preparation for a reserve ratio cut.
However, many money market traders doubt reserve ratios will be cut, and any cut might simply be to compensate for shrinking money inflows into China due to a falling trade surplus and weakening inward direct investment. Nor would a reserve ratio cut necessarily channel much more money to the property sector. "The index is still in a consolidation phase - fresh profit-taking could easily emerge if the index rises above 2,200 points again," said Zhou Lin, analyst at Huatai Securities.
Zhang Yanbing, analyst at Zheshang Securities, said: "The market consolidated for a week and it did not fall much during that time, which in itself is good news." But he added that turnover would need to stay high - by no means inevitable, given uncertainty over the economy and corporate earnings - for any extended uptrend in stocks to occur. Among financials, Bank of Communications climbed 4.73 percent to 5.98 yuan ahead of the expected release of its 2008 earnings on Thursday.
Industrial Bank rose 1.37 percent to 21.45 yuan after jumping 6.98 percent on Monday in anticipation of its 2008 earnings, which it had been due to release on Tuesday. It said on Tuesday morning that the release would be delayed until April 28 as it finalised senior managers compensation.
China Sports Industry Group gained 3.25 percent to 9.52 yuan and Beijing Vantone Real Estate jumped 7.44 percent to 17.62 yuan after saying they had signed a contract to build the Olympic International Village in Hainan, a conference and holiday facility which will involve investment of at least 5.2 billion yuan.
Shares related to the southern city of Zhuhai surged for a third straight day after Premier Wen Jiabao said on Friday that financing issues involving construction of a huge bridge linking Hong Kong, Macau and Zhuhai had been resolved, and that work would start this year. Previously, Hong Kong Chief Executive Donald Tsang had said construction would start in 2010.

Copyright Reuters, 2009

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