Chinese stocks jumped 5.33 percent on Monday in their biggest gain for over two years, buoyed by a rebound in foreign markets after the US Federal Reserve cut a key banking rate to ease the global credit squeeze. Institutional investors, which had taken profits in banks and other large-caps on Thursday and Friday, jumped back into them.
Industrial & Commercial Bank of China, the biggest bank, surged 9.75 percent to 7.09 yuan, after rising its 10 percent daily limit at one stage. The Shanghai Composite Index ended at 4,904.855 points, less than two points off its high. Its 5.33 percent gain for the day was the biggest since June 2005, bringing it back near its record intra-day high of 4,916.310, hit last Wednesday.
Rising Shanghai shares overwhelmed losers by 839 to 17. Turnover in Shanghai A shares expanded to 144.1 billion yuan ($19.0 billion) from Thursday's 132.0 billion, though it remained little over half the peak turnover seen during the height of the market's bull run in May.
The Chinese market, which is up 83 percent so far this year, has largely ignored turmoil in global markets this month because it is insulated by capital controls. But it tumbled 2.28 percent on Friday as weakness in global markets encouraged a flurry of profit-taking.
"The upward trend of China's stock market was slightly interrupted last week by the global credit squeeze," said Huang Yan, fund manager at Guotai Fund Management Co "Now that concern is temporarily gone, it's natural for stocks to rebound."
The government said on Monday that Chinese residents would be allowed to invest directly in Hong Kong securities for the first time, under a pilot programme being launched in the northern city of Tianjin. The reform is part of long-term efforts by the central government to restore some stability to the domestic stock market by opening other investment channels. But it is unlikely to draw much money from the domestic market soon, analysts said. "This will not have a big negative impact on Chinese stocks," said Jiang Jianrong at Shenyin Wanguo Securities Co "Many Chinese are already buying Hong Kong stocks, and those who aren't may not want to because the yuan is rising."
Some traders think the index could break above 5,000 points in coming days or weeks, though that level is seen as strong resistance and could prompt fresh waves of profit-taking. Steelmakers were particularly strong on Monday. Baoshan Iron and Steel Co, China's biggest steelmaker, jumped its 10 percent daily limit to 16.23 yuan, although industry sources told Reuters on Friday that the company was expected this week to announce a cut in fourth-quarter steel product prices.
Industrial Bank gained 8.78 percent to 50.90 yuan after reporting that first-half net profit more than doubled, though that was in line with a profit estimate issued last month. Minsheng Bank climbed 6.25 percent to 15.46 yuan. Sources told Reuters that the bank was in the final stages of talks to buy control of Shaanxi International Trust & Investment in northern China.
The acquisition would help Minsheng's expansion in the fund management sector. Shaanxi Trust jumped 10 percent to 20.90 yuan. Yingkou Port jumped 10 percent to 15.11 yuan after releasing details of a previously announced plan to buy key assets from its state parent via a share placement and cash payment worth 5.85 billion yuan.
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