China's stock market shrugged off a surprise monetary tightening and edged up to a new record high on Tuesday, although analysts said the market looked increasingly likely to stage a short-term pull-back.
The Shanghai Composite Index ended the day up 0.68 percent at an all-time closing high of 4,471.032 points, near a record intra-day high of 4,476.626 hit earlier in the day. On Monday, the index surged 2.20 percent. Gaining stocks outnumbered losers by 531 to 336 on Tuesday, while turnover in Shanghai A shares remained moderate at 148.3 billion yuan ($19.6 billion) against Monday's 151.7 billion yuan.
The index has risen over 14 percent in the past eight trading days, and is up 67 percent so far this year. The market dipped as much as 1.4 percent in early trade in response to the central bank's announcement late on Monday, several weeks earlier than expected, that it was raising bank reserve requirements by another 0.5 percentage point.
But most stocks quickly recovered, buoyed by strong expectations for corporate earnings after a better-than-expected start to the first-half results season. Analysts said the relatively mild monetary tightening was not expected to hurt corporate profits significantly, and did not appear to be aimed at cooling the stock market, where turnover has stayed moderate compared to frenzied rallies in May and June.
Banks and real estate were among the weakest sectors on Tuesday as the reserve hike could cut their access to funds slightly. CITIC Bank dropped 2.96 percent to 10.49 yuan, while Vanke lost 0.67 percent to 28.30 yuan.
Wuhan Iron & Steel surged to a high of 13.22 yuan, but then came well off that to close only 0.64 percent higher at 12.64 yuan, after news that its parent group planned to buy smaller rival Kunming Iron and Steel Group. Financial details and the timing were not disclosed. Kunming produced about a third as much crude steel as the Wuhan group last year.
Base metal stocks were strong on the back of rising copper and other metal prices, with Western Mining up 9.25 percent to 43.92 yuan. Listed on July 12, it has more than tripled from its initial public offer price. China Railway Erju Co jumped its 10 percent daily limit to 25.84 yuan after the company said it had won a tunnel civil engineering and highway construction contract worth 788 million yuan.