China stocks rebound

Chinese shares rebounded on Tuesday, led by financial and steel stocks amid talk that after plunging 18 percent in November, the market might finally be establishing a bottom. But the main index ended well off its high and turnover shrank, showing many investors doubted that an extended recovery was starting.
The benchmark Shanghai Composite Index rose as much as 2.11 percent soon after the opening but ended only 0.97 percent higher at 4,915.889 points. Rising Shanghai stocks outnumbered losers by 487 to 349, but turnover in Shanghai A shares slipped to a very thin 60.1 billion yuan ($8.1 billion) from Monday's 68.2 billion yuan.
Since hitting an intra-day low of 4,778.727 last Wednesday, the index has not set a fresh low. "The market has dropped too much in past weeks, so some investors see it as an opportunity to buy," said Chen Ge, fund manager at Fullgoal Fund Management, who expects profits at listed Chinese banks to grow 40 percent on average next year - which could be rapid enough to put a floor under prices.
The amount of money invested in A shares continued to expand rapidly last month, rising by 120 billion yuan ($16.2 billion) to 1.78 trillion yuan, the official Shanghai Securities News said. Although the new money largely went into IPOs rather than shares in the secondary market, the availability of fresh funds is making some investors think that when the market does bottom out, its recovery could be strong.
But many investors think Tuesday's rally will not last, citing high valuations, further government efforts to bring inflation down, and the prospect of corporate profit growth slowing next year from this year's spectacular pace.
"It's natural to have a rebound following a sharp fall," said Hang Yan, fund manager at Guotai Fund Management. "But the biggest concern is China's economy next year. If growth slows down, the stock market will lose its support."
In a monthly Reuters poll released last Friday, Chinese fund managers forecast on average that the index would stand at 5,283 points three months from now - indicating a rebound, but only a modest one.
Financial stocks led Tuesday's rally. Ping An Insurance, which said it had received Chinese government approval to invest up to 15 percent of its assets abroad, gained 2.92 percent to 116.83 yuan.
Steelmakers were generally strong after Xu Lejiang, chairman of the Baosteel group, was quoted by the 21st Century Business Herald as saying it was considering a bid for resources giant Rio Tinto Group.
There was speculation that the bid, which would help secure supplies of iron ore, would involve other Chinese steelmakers. Baosteel's listed unit Baoshan Iron and Steel Co jumped 5.22 percent to 15.53 yuan, while Beijing Shougang Co rose 2.56 percent to 7.61 yuan.
But it was unclear whether the steelmakers would have the resources or the political clout for such a huge acquisition. A senior executive at the Shougang group, Tan Yixin, general manager of China Shougang International Trade and Engineering Corp Mineral Import and Export Company, said the speculation was incorrect and the result of a misunderstanding.
"Shougang is not involved in and will not be involved in any joint bid for Rio Tinto Group," Tan said. "The company is not aware of any joint bid among steelmakers in China for Rio Tinto Group."
TCL Corp, which jumped 5 percent on Monday after a suspension, climbed a further 1.58 percent to 5.14 yuan on hopes for its restructuring programme. TCL said over the weekend that it had agreed to sell control of its PC business in a deal worth 60 million yuan.
Suning Appliance Co surged 2.51 percent to 58.00 yuan after China Business News reported it would take over Beijing-based rival Dazhong Electronics for 3 billion yuan. But a Suning spokesman said the company was still evaluating Dazhong's assets and no agreement had been reached, according to the newspaper.
Yatong, which operates a ferry service from downtown Shanghai to nearby Chongming Island, jumped its 10 percent daily limit for the second straight day on speculation that the city might soon reach a preliminary agreement to build a theme park on or near the island - perhaps a Disneyland, which has been considered in the past.
A district official said last month that Shanghai intended to build a major theme park, but that no specific plan had been decided and that the project might or might not involve a foreign company.