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Index gains a little despite record-high inflation data

SHANGHAI stock market rose for a second trading day today, powered by airline and water resources-related shares which rallied over huge industry incentive packages offered by the central government.

The Shanghai Composite Index added 0.18 percent to 2,802.69. Turnover fell slightly to 101.44 billion yuan (US$15.7 billion) from Friday's 102.8 billion yuan.

Analysts said the gains showed the market has not been affected by a slew of economic data released over the weekend, which saw inflation hitting a three-year high while imports slowed sharply last month.

China Southern Airlines led its industry peers higher on reports that China will invest 1.5 trillion yuan in the aviation industry in the next five years.

China Southern climbed 2.54 percent to 8.48 yuan while Air China jumped 1.67 percent to 10.37 yuan.

Government incentives also pushed irrigation-related shares higher today after China pledged to invest 4 trillion yuan in the next decade to intensify construction of water facilities, an urgent effort to enhance grain safety and fight drought and floods.

Anhui Water Resources Development Co hiked 3.78 percent to 15.65 yuan.

China will prioritize water projects in its infrastructure construction and take irrigation and water conservancy as a major task in rural infrastructure improvement, according to a two-day meeting chaired by President Hu Jintao over the weekend.

Hu said China will establish a water system that can shield the nation from the impact of floods and drought, utilize water efficiently and protect water resources by 2020.

The huge investments in water-resources sector indicated that China is making slight changes to its micro-economy policies but will maintain tightening until inflation eases from high levels, according to a team of analysts of China International Capital Corporation headed by Zeng Lingbo.

The group's report expected the country's inflation will gradually fall down after hitting a worse-than-expected 6.4 percent last month, which means the government is likely to slow down its tightening moves in the near future.

"Although the June inflation is higher than expected, the figure is not likely to change the fact that a rebounding momentum is taking place in the market," the report said.




 

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