China's main stock index closed slightly higher on Friday as financial stocks rebounded, but most shares fell and turnover shrank because of concern about a further tightening of economic policy. The Shanghai Composite Index dropped as much as 1.17 percent in the morning before it recovered in the afternoon, closing up 0.43 percent at 4,132.868 points.
But the gains were mostly due to heavily weighted financial shares, with Pudong Development Bank up 5.03 percent to 35.91 yuan and Ping An Insurance climbing 1.47 percent to 65.38 yuan, aided by a nearly 4 percent jump in its Hong Kong-listed H shares.
Losing Shanghai stocks outnumbered gainers by 516 to 338. Turnover in Shanghai A shares fell to 150.5 billion yuan ($19.8 billion), the lowest since June 4, when the market plunged in response to a hike in the stock trading tax. Thursday's turnover was 183.4 billion-yuan.
The index dropped 1.47 percent on Thursday after Premier Wen Jiabao said policy would be tightened to cool the economy. The market expects at least a 0.27 percentage point interest rate hike in coming weeks, and there is speculation that the tax on bank interest could be scrapped to slow fund flows into stocks.
"The government is most concerned about excessive growth in fixed-asset investment," said Zhang Dongyun, analyst at Haitong Securities. Urban fixed-asset investment rose 25.9 percent from a year earlier in the first five months of 2007, accelerating from 25.5 percent growth in January-April, the government said on Friday.
"The authorities may also have worries about the bubble in stock market, but what they want to do first is to cut inflation and limit fixed-asset investment," Zhang said. Gezhouba climbed 10 percent to 18.01 yuan after saying the government had approved in principle its plan to merge with a group company.
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