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Stocks make strong gains as investors note hopeful signs
By Pan Xiaoyiand Leo Zhang |
February 7, 2009, Saturday
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Print Edition
Print Edition
SHANGHAI'S key stock index posted its highest weekly gain since mid-November when it closed with a single-day jump of nearly 4 percent yesterday.
The market rose almost 10 percent during the week on hopes that government measures to boost key industrial sectors may spur the pace of economic growth and because of some tentative signs that the downturn may be easing.
Market observers, however, said they doubt the brief bull run can be sustained and questioned whether investor confidence would remain at present levels if regulators resume initial public offerings, as some fear.
The Shanghai Composite Index advanced 3.97 percent yesterday, the largest single-day rise since December 3, to finish at 2,181.24, the highest close in more than four months.
The surge in the local bourse also appeared to help push up Hong Kong shares, with the benchmark Hang Seng Index rising 3.61 percent for the third straight day of gains. It added 2.8 percent for the week.
Key stock gauges in other Asian markets including Japan, South Korea and Singapore also rose yesterday on optimism that stimulus measures in the United States may help ease the global slowdown.
"The rise in Shanghai was fueled by capital inflows after the government announced stimulus plans for a few industries and banks boosted credit to support investment," said Liu Yu, an Orient Securities Co analyst. "But the rebound may be just technical and doesn't mean China's economy has hit bottom."
China's Cabinet recently approved plans to boost the country's auto, steel, textile and equipment-manufacturing industries.
It will soon reveal proposals for the electronics, information technology and shipbuilding industries.
Many analysts also attributed this week's index jump to a rise in a key manufacturing index and news of a surge in bank lending, which fanned optimism that the economic slowdown might be less severe than has been forecast.
The purchasing managers index, a gauge of manufacturing activities in China, hit 45.3 in January, up from December's 41.2 and November's low of 38.8, the government-backed China Federation of Logistics and Purchasing said on Wednesday. A figure below 50 represents contraction.
On the finance front, China's bank lending reportedly exceeded 1.2 trillion yuan (US$176 billion) in January, a monthly record, with a majority of the loans going to government-driven infrastructure projects.
Although the Shanghai index is likely to maintain momentum for the next few days, analysts said it would come under pressure if concrete measures such as interest rate cuts are not forthcoming and regulators resume corporate fundraising. But at this point, no one knows when the resumption of IPOs might come.
No companies have conducted IPOs on the Shanghai or Shenzhen stock markets since September 2008 as regulators acted to ease worries about a stock supply glut.
"The market is set for profit taking as early as next week," said Wu Zhiguo, a Guohai Securities Co analyst.
"Concerns about the economic slowdown have not gone away, and any negative news may trigger a drop."
In yesterday's trading, auto makers led the gains on expectations that details of the government's announced 5 billion yuan in subsidies for vehicles purchased by farmers will be disclosed in March.
China is expected to become the No. 1 auto market after US auto sales plunged to a 27-year low in January.
Beiqi Foton Motor Company Ltd shares jumped by the 10 percent daily cap to 7.36 yuan. FAW Car Co soared 8.21 percent to 10.15 yuan. Shenyang Jinbei Automotive Co shares advanced 6.33 percent to 3.19 yuan.
The market rose almost 10 percent during the week on hopes that government measures to boost key industrial sectors may spur the pace of economic growth and because of some tentative signs that the downturn may be easing.
Market observers, however, said they doubt the brief bull run can be sustained and questioned whether investor confidence would remain at present levels if regulators resume initial public offerings, as some fear.
The Shanghai Composite Index advanced 3.97 percent yesterday, the largest single-day rise since December 3, to finish at 2,181.24, the highest close in more than four months.
The surge in the local bourse also appeared to help push up Hong Kong shares, with the benchmark Hang Seng Index rising 3.61 percent for the third straight day of gains. It added 2.8 percent for the week.
Key stock gauges in other Asian markets including Japan, South Korea and Singapore also rose yesterday on optimism that stimulus measures in the United States may help ease the global slowdown.
"The rise in Shanghai was fueled by capital inflows after the government announced stimulus plans for a few industries and banks boosted credit to support investment," said Liu Yu, an Orient Securities Co analyst. "But the rebound may be just technical and doesn't mean China's economy has hit bottom."
China's Cabinet recently approved plans to boost the country's auto, steel, textile and equipment-manufacturing industries.
It will soon reveal proposals for the electronics, information technology and shipbuilding industries.
Many analysts also attributed this week's index jump to a rise in a key manufacturing index and news of a surge in bank lending, which fanned optimism that the economic slowdown might be less severe than has been forecast.
The purchasing managers index, a gauge of manufacturing activities in China, hit 45.3 in January, up from December's 41.2 and November's low of 38.8, the government-backed China Federation of Logistics and Purchasing said on Wednesday. A figure below 50 represents contraction.
On the finance front, China's bank lending reportedly exceeded 1.2 trillion yuan (US$176 billion) in January, a monthly record, with a majority of the loans going to government-driven infrastructure projects.
Although the Shanghai index is likely to maintain momentum for the next few days, analysts said it would come under pressure if concrete measures such as interest rate cuts are not forthcoming and regulators resume corporate fundraising. But at this point, no one knows when the resumption of IPOs might come.
No companies have conducted IPOs on the Shanghai or Shenzhen stock markets since September 2008 as regulators acted to ease worries about a stock supply glut.
"The market is set for profit taking as early as next week," said Wu Zhiguo, a Guohai Securities Co analyst.
"Concerns about the economic slowdown have not gone away, and any negative news may trigger a drop."
In yesterday's trading, auto makers led the gains on expectations that details of the government's announced 5 billion yuan in subsidies for vehicles purchased by farmers will be disclosed in March.
China is expected to become the No. 1 auto market after US auto sales plunged to a 27-year low in January.
Beiqi Foton Motor Company Ltd shares jumped by the 10 percent daily cap to 7.36 yuan. FAW Car Co soared 8.21 percent to 10.15 yuan. Shenyang Jinbei Automotive Co shares advanced 6.33 percent to 3.19 yuan.
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