A late surge pushed Chinese stocks to a higher close on Tuesday, with non-ferrous metals and property shares outperforming. Trade remained heavy as new money continued to enter the market on hopes for an economic recovery. The Shanghai Composite Index moved in and out of positive territory for most of the day as investors took profits; the market has jumped 24 percent since the start of this year.
But it ended up 1.82 percent at a new four-month closing high of 2,265.161 points, just off an intra-day high of 2,266.398. Turnover in Shanghai A shares was very large at 135.1 billion yuan ($19.8 billion), though it was down from Monday's huge 150.0 billion yuan, which was a nine-month high. Gaining Shanghai A shares outnumbered losers by 753 to 164. China's annual consumer price inflation slowed to a 30-month low of 1.0 percent in January from 1.2 percent in December, the government said. That was at the top of expectations but seen by some investors as moderately positive for the market.
The inflation rate was low enough to keep alive hopes for at least one more interest rate cut. But the drop of inflation was the smallest in nine months, which was in line with talk, originally sparked by data last week, that economic growth might be starting to bottom out.
"The index is still being buoyed by large amounts of money attracted by recovering investor confidence," said Chen Jinren, an analyst at Huatai Securities. Although profit-taking pressure is increasing, the market may not fall back much as long as data continue to support the economic recovery theme, analysts said.
An industry source said on Monday that Chinese banks extended a record of roughly 1.6 trillion yuan in new loans in January, in response to pressure from the government. That was even higher than the 1.2 trillion yuan estimate which state media previously quoted; the central bank is due to publish the data by February 15 at the latest.
Some investors are speculating that hopes for more government policies to aid industries, such as tax breaks, may keep the market in an uptrend until China's parliament session in March. "With such large amounts of money coming in, investors have little fear in buying, though most of them know the rebound will end eventually," said Cao Xuefeng, analyst at Western Securities. Some analysts see the next major technical resistance for the index at 2,333 points, its late September peak.