China's key stock index edged up 0.06 percent on Monday with blue chips firmer on expectations of upbeat earnings while health-related shares rose and travel shares sank after the United States declared H1N1 flu a national emergency. The Shanghai Composite Index ended at 3,109.566 points, after posting its highest close in 10 weeks on Friday.
Hong Kong's financial markets were closed on Monday for a local holiday. Hong Kong stocks rose 1.71 percent to a 14-month closing high on Friday as shares of financial firms rebounded and with abundant liquidity building investor confidence. Losing Shanghai A shares outnumbered gainers by 484 to 447, however, while turnover shrank to 131 billion yuan ($19.19 billion) from Friday's 157 billion yuan.
"The economic recovery in the fourth quarter is likely to be much better than expected, earnings in the third quarter are upbeat and the index is likely to post gains step-by-step," said Wen Lijun, an analyst at Nanjing Securities. China's economic recovery has consolidated after performing better than expected, although China will stick to its active fiscal policy and appropriately loose monetary policy, Vice-Premier Li Keqiang said on Monday.
A report released by Peking University also said China's economy was expected to grow 10.6 percent in the fourth quarter and the consumer price index to rise 0.5 percent, with domestic demand growing rapidly and foreign trade continuing to recover. China Life climbed 3.85 percent to 31.54 yuan ahead of the release of its third-quarter earnings after the market's close. Ping An Insurance, which is due to report on Tuesday, rose 1.47 percent to 59.36 yuan.
Health-related shares outperformed while travel shares were hit hard after US President Barack Obama declared 2009 H1N1 swine flu a national emergency over the weekend. Guilin Layn Natural Ingredients, a health food products maker, surged by its 10 percent daily limit to 43.66 yuan while China International Travel Service sank 3.79 percent to 16.48 yuan.
Metal shares were firmer on strong commodity prices, with Yunnan Chihong Zinc gaining 3.71 percent to 31.28 yuan as zinc prices hit a 17-month peak. China's Yanzhou Coal Mining jumped 3.30 percent to 20.36 yuan after saying it had won conditional approval from Australia's regulatory authority after resubmitting its application for the purchase of Felix Resources Ltd.
On a positive note, China has resumed issuing quotas under its overseas investment scheme to allow domestic investors to put money into overseas markets after a 17-month halt as global markets stabilise and it seeks ways to channel its mounting foreign exchange reserves.
Shares of China and Hong Kong, among the world's top-performing markets this year, could jump 20 percent in 2010 as China's economy is expected to outgrow any rivals in the world, an executive of China AMC said on Monday. CITIC Securities said in a note on Monday that A shares could rise more and it held a positive view of the property industry this year; and while inflation expectations are increasing, it will also keep an eye on shares in related sectors such as steel, metal and coal.
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