Financial firms help key gauge rise
By Lydia Chen |
April 7, 2011, Thursday
|
Print Edition
Print Edition
FINANCIAL shares propelled Shanghai's key stock index over 1 percent to end above 3,000 points yesterday for the first time in nearly one month, shrugging off the Chinese central bank's latest interest rate hike which aims to curb inflation.
The Shanghai Composite Index jumped 1.1 percent to 3,001.36, the highest since March 9. Turnover expanded to 176 billion yuan (US$27 billion) from 127 billion yuan last Friday, the last trading day before the Qingming Festival holiday.
Financial companies, including lenders, insurers and brokerages, gained the most, with a sub-index showing the sector rose 3.08 percent yesterday.
Banks performed strongly as analysts explained that the rate rise, the fourth hike since October, was considered positive for lenders as it could widen the gap between lending and deposit rates and help the banks to lift their earnings slightly.
The Industrial and Commercial Bank of China, the world's biggest lender by market value, added 1.8 percent to 4.58 yuan. The Bank of Communications climbed 4.3 percent to 6.06 yuan.
China's benchmark one-year lending rate rose to 6.31 percent while the one-year deposit rate is 3.25 percent.
Rising rates will also benefit the insurance industry in the long run as a result of higher sustainable investment returns and widening product profit margins, according to Barclays Plc.
Ping An Insurance (Group) Co added 3.9 percent to 53.23 yuan. Ping An's profit climbed 25 percent last year as premiums expanded and rising interest income helped ameliorate the drag on investment returns from a slump in equities.
China's cycle of raising interest rates is "coming close to an end" and the central bank may boost borrowing costs only one more time this year, according to Goldman Sachs Group Inc.
Higher oil prices and rising property prices probably contributed to the decision to boost rates, Goldman Sachs said in a report.
Chen Li, head of China Equity Strategy at UBS Securities Co, said lenders and real estate developers may stay attractive until mid-May when their valuations rebound to normal levels.
He forecast one more interest rate hike in the remainder of this year.
The Shanghai Composite Index jumped 1.1 percent to 3,001.36, the highest since March 9. Turnover expanded to 176 billion yuan (US$27 billion) from 127 billion yuan last Friday, the last trading day before the Qingming Festival holiday.
Financial companies, including lenders, insurers and brokerages, gained the most, with a sub-index showing the sector rose 3.08 percent yesterday.
Banks performed strongly as analysts explained that the rate rise, the fourth hike since October, was considered positive for lenders as it could widen the gap between lending and deposit rates and help the banks to lift their earnings slightly.
The Industrial and Commercial Bank of China, the world's biggest lender by market value, added 1.8 percent to 4.58 yuan. The Bank of Communications climbed 4.3 percent to 6.06 yuan.
China's benchmark one-year lending rate rose to 6.31 percent while the one-year deposit rate is 3.25 percent.
Rising rates will also benefit the insurance industry in the long run as a result of higher sustainable investment returns and widening product profit margins, according to Barclays Plc.
Ping An Insurance (Group) Co added 3.9 percent to 53.23 yuan. Ping An's profit climbed 25 percent last year as premiums expanded and rising interest income helped ameliorate the drag on investment returns from a slump in equities.
China's cycle of raising interest rates is "coming close to an end" and the central bank may boost borrowing costs only one more time this year, according to Goldman Sachs Group Inc.
Higher oil prices and rising property prices probably contributed to the decision to boost rates, Goldman Sachs said in a report.
Chen Li, head of China Equity Strategy at UBS Securities Co, said lenders and real estate developers may stay attractive until mid-May when their valuations rebound to normal levels.
He forecast one more interest rate hike in the remainder of this year.
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