Shanghai stocks close on a high
Print Edition
SHANGHAI shares jumped 3.51 percent yesterday, the highest this week, amid hopes that the government may beef up the market with more funds.
The Shanghai Composite Index closed at 3,957.35 points yesterday to erase the weekly drop.
Infrastructure companies and pharmaceutical firms led the gain with China Railway Engineering Co jumping 5.06 percent to 14.34 yuan (US$2.31), and Kangmei Pharmaceutical Co surging 5.88 percent to 19.8 yuan.
China Securities Finance Co, a state-backed agency that provides margin finance and liquidity to the stock market, was reported to have 2.6 trillion yuan on tap to support shares, news website Caijing.com reported yesterday.
“The news hasn’t been confirmed by officials yet, though it delivered a positive message to investors that government was willing to offer its support,” said Li Bo, a senior investment consultant at GF Securities Co.
The funds will be used to offer liquidity support to 17 brokerages and to purchase stocks and mutual funds, the report claimed. It follows a series of government measures, including banning major shareholders from selling stakes, ordering state-run institutions to buy equities to rescue a market rout worth US$4 trillion.
The Shanghai Composite rebounded 12.8 percent till yesterday since July 8. The stocks tumbled 32 percent in a month as investors’ unwounded margin-debt positions.
A total of 545 stocks were still not trading, which is about 19 percent of all listings, down from more than 1,300 at the end of last week.
Experts have warned that government measures should only be seen as a temporary effort and it was time to let the market run by itself.
“In terms of fundamentals, a gauge level between 3,000 and 3,500 points is reasonable. A bubble may occur if it surpasses 4,000,” said Qian Jun, a professor of finance at Shanghai Advanced Institute of Finance of Shanghai Jiao Tong University.
“Investors will be misled by a government-backed bull run which causes speculation and irrational trading.
“Government should recall its buying once the outstanding balance of margin finance is under control,” Qian added.
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