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August 12, 2011

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Stocks close higher on low valuations

SHARES in Shanghai yesterday rose unexpectedly, outperforming most overseas markets, on relatively low valuations.

The Shanghai Composite Index gained 1.3 percent, the most since July 13, to close at 2,581.51, after falling as much as 1.7 percent.

Analysts attributed the market's sterling performance to historically low share valuations now. The Shanghai benchmark has already lost more than 8 percent so far this year. Stocks on the index trade at 11.8 times estimated earnings, a record low, according to data compiled by Bloomberg News.

"Shares are already very cheap," said Zeng Tao, an analyst at Galaxy Securities Co. "They are now at a level almost as low as they were when the market plunged to historic lows in 2008."

Quoting unnamed sources, the Economic Observer reported on its website yesterday that the National Council for Social Security Fund, which manages total assets worth more than 856 billion yuan (US$134 billion) by the end of last year, has pumped up to 10 billion yuan into all its stock accounts. The move was believed to another factor for the unexpected performance in the local market.

Airlines rose after the government said it will suspend approval for new railway projects, adding that it will reduce the speed of some high-speed rail lines that recently started operating.

China Southern Airlines Co, the country's biggest carrier, climbed 7 percent to 8.11 yuan. China Eastern Airlines Co, the second-largest, jumped by the daily cap of 10 percent to close at 5.57 yuan. Air China rose 4.9 percent to 9.42 yuan.

Major brokerages, including Guotai Junan Securities, Shenyin and Wanguo Securities and Oriental Securities, forecast 2,400 points would be the bottom level.



 

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