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September 14, 2009

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Stocks rally expected to push forward

SHANGHAI stocks are expected to continue a rally that's driven the market 10 percent higher this month, amid strengthened expectations that the government's stimulus program will accelerate economic growth.

The benchmark Shanghai Composite Index rose 4.5 percent last week to end at 2,989.79 points. Its biggest weekly gain in seven weeks came after the government reported stronger-than-expected economic data.

"The rally is expected to continue as stronger industrial production, investment and retail sales underscored the economic recovery," Anhui Great Times Investment Consulting Co wrote in a research note.

Still, investors should be cautious about key technical levels where market rallies may falter, analysts said.

The market has been volatile in recent months. This month's gains followed a 16 percent decline in the benchmark index last month.

Industrial output gained 12.3 percent last month from a year earlier, and urban infrastructure investment in the first eight months jumped 33 percent, the National Bureau of Statistics said last Friday.

Separately, the People's Bank of China reported bank lending rose to 410.4 billion yuan last month, up from 355.9 billion yuan in July and 271.54 billion yuan in August 2008.

"The data beat market expectation, and investors firmly believe the government's target of 8 percent economic growth can be achieved," the note said.

The firm said the index may break 3,000 this month.

Cai Junyi, an analyst from Shanghai Securities Co, said the market is likely to shoot through the key 3,000 psychological level, but it may have trouble holding its ground above there.

He said banks, in particular, which led Friday's gains, may lack momentum beyond that point.


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