China's stock market continued rising on Tuesday as coal shares surged, banks were supported by a solid earnings estimate from Pudong Development Bank, and leading property developer Vanke gained on December sales data.
The Shanghai Composite Index, which climbed 3.29 percent on Monday, ended Tuesday up 3.00 percent at 1,937.145 points, just off the day's high of 1,938.960. Gaining Shanghai A shares outnumbered losers by 920 to 15, and turnover in Shanghai A shares expanded to an active 68.7 billion yuan ($10.1 billion) from Monday's 46.0 billion yuan.
"The index still faces resistance around 2,000 points, so it might consolidate now above 1,900. Sentiment has improved," said Zhou Lin, analyst at Huatai Securities. Cao Xuefeng, analyst at Western Securities, said the index might test 2,100 points, its peak in December, before Chinese New Year in late January. But Zhou and other analysts said a sustained rally remained unlikely before the release of December economic data, which is due in mid-January and is expected to be poor.
Another worry for the market is the possibility of a resumption of initial public offers, which could worsen the supply/demand balance. Regulators have essentially halted IPOs in recent months as a means of supporting the market, but an extended market rally might prompt the ban to be lifted. Chris Ruffle, head of China business for Scottish fund manager Martin Currie, one of the biggest foreign institutional investors in Chinese stocks, told Reuters that stocks had largely priced in expectations for a bad economy this year and "the market is near its bottom".
But he added that investors still faced risks because company earnings might prove worse than expected, while growing unemployment threatened social stability. The official Shanghai Securities News reported on Tuesday that a total of 128 listed companies had so far forecast net losses for 2008, partly because of a weakening economy; 90 of those 128 firms made profits in 2007.