Chinese stocks rose on Monday, led by banks and property shares, after a meeting of the Communist Party leadership appeared to shift economic policy slightly towards sustaining growth from fighting inflation.
The party's Politburo said in a statement late on Friday that curbing inflation was a priority, but it also stressed the need to "maintain stable but rapid economic growth", and analysts said its overall tone was less hawkish about curbing growth to fight inflation than previous statements. )
This reduces the chance for aggressive monetary tightening, while suggesting that bank lending quotas could be eased and exporters might be given better tax treatment, analysts said. "The government's meeting has reassured investors - for one thing, some people now think there's little chance of an interest rate hike in the rest of 2008," said Chen Huiqin, analyst at Huatai Securities.
The Shanghai Composite Index ended up 1.32 percent at 2,903.012 points after hitting a high of 2,924.447. It rose 3.12 percent last week. Turnover in Shanghai A shares remained moderate, however, at 64.4 billion yuan ($9.4 billion) against Friday's 63.7 billion. Gaining Shanghai A shares outnumbered losers by 719 to 197.
Chen said that if the index cleanly broke above resistance on the 2,950 point level, where it peaked in early July, it could target the 3,200-3,300 area in August. Other analysts pointed out that a clean break above major chart resistance at the April low of 2,990 points would trigger a reverse head & shoulders pattern formed by the lows since mid-June. The pattern would point above 3,300 points.
The market's strength on Monday was striking because it occurred despite an announcement by China South Locomotive & Rolling Stock Corp, the country's biggest train maker, that it was launching an A-share IPO in Shanghai which is expected to raise around 9 billion yuan. The announcement may indicate securities regulators now feel the market is strong enough to let a series of large IPOs proceed in coming weeks, which could pressure liquidity.
"The comparative strength of the market around the Olympics means it can cope with big IPOs better than it could before. But the index will still run into profit-taking by institutions as it rises step by step," said Cao Xuefeng, analyst at Western Securities.
In another positive sign, the Chinese fund management joint venture of Credit Agricole SA has raised 5.2 billion yuan for its first mutual fund, two sources with direct knowledge of the sales said on Monday. That was much better than the average of about 800 million yuan raised by funds launching in the second quarter of this year.
FIRST-HALF EARNINGS The biggest bank, Industrial & Commercial Bank of China advanced 2.14 percent to 5.26 yuan on Monday, while property developer Vanke rose 1.09 percent to 9.25 yuan.
Bai Hongwei, property analyst at China International Capital, said in a research note that buying property shares was better than buying property, since stocks now reflected a 20-30 percent drop in real estate prices, while real estate prices were unlikely to fall nearly that much.
Yanzhou Coal Mining rose 3.70 percent to 19.61 yuan after estimating its first-half net profit soared at least 220 percent. Shaanxi Baoguang Vacuum Electronic Apparatus jumped its 10 percent daily limit to 6.37 yuan after reporting interim profit jumped more than twentyfold to 5.07 million yuan.
Hubei Fuxing Science & Technology gained 7.29 percent to 8.09 yuan after saying some of its directors planned to buy shares in the company from the secondary market. Zhejiang King Refrigeration Industry surged 10 percent to 9.81 yuan after saying it planned to place 130 million new A shares to buy molybdenum mining assets worth an estimated 1.43 billion yuan. The stock had been suspended since June 25. Zhejiang Great Southeast Packaging staged a strong debut in Shenzhen, climbing 75 percent from its IPO price to 9.25 yuan.