SHANGHAI: China's main stock index jumped nearly 6 percent on Wednesday because
of hopes that the government would introduce a stimulus package to boost the
slowing economy and aid the stock and property markets. The Shanghai Composite
Index ended the morning up 5.89 percent at 2,482.642 points, near an intra-day
high of 2,489.486. On Tuesday it hit a fresh 20-month, intra-day low, having
dropped more than 60 percent from last October's peak.
Gaining stocks in Shanghai outnumbered losers by 935 to one, with over 30
Shanghai A shares up their 10 percent daily limits. Turnover in Shanghai A
shares expanded to 29.7 billion yuan ($4.3 billion). That was still small
compared to levels seen during last year's bull run but it exceeded Tuesday's
full-day turnover of 27.6 billion yuan.
Frank Gong, chief China economist at JPMorgan Chase, wrote on Tuesday that
China's leaders were considering an economic stimulus package of at least
200-400 billion yuan and might ease monetary policy by the end of the year.
"This will include tax cuts and measures to 'stabilise domestic capital
markets' and support 'healthy development of the housing market'," he said.
Vice premier Li Keqiang said on Tuesday that China must increase domestic
spending to keep growth on track as the global economy weakened.
Many fund managers and analysts said that with the contents and timing of any
stimulus package unknown, it was unclear if the package would do much to halt a
slowdown in economic and corporate profit growth. So stocks are not necessarily
starting any kind of extended recovery, they said. "But some kind of correction
to the market's steep fall is reasonable, so the index may move between 2,300
and 2,600 points for a while as everybody waits to see if the positive news is
confirmed," said Chen Huiqin, analyst at Huatai Securities.
Much of the market sees major technical support for the index at 2,245 points,
its high for the year 2001. Stocks surged across the board on Wednesday but
brokerages led the gains on hopes that a stock market recovery would boost
their commission and underwriting income. Several brokerages soared their 10
percent limits with CITIC Securities , the biggest listed brokerage, up 10
percent to 18.70 yuan.
The biggest bank, Industrial & Commercial Bank of China, climbed 5.00 percent
to 4.83 yuan while property giant Vanke jumped 7.27 percent to 7.38 yuan.
Industrial Bank gained 6.48 percent to 24.66 yuan after saying net profit in
the first half surged 80 percent, slightly better than its previous estimate of
at least 70 percent growth. Railway Erju rose 5.98 percent to 5.85 yuan after
saying net profit in the first grew 31 percent.
Hainan Airlines surged 6.15 percent to 3.97 yuan after saying it expected its
first-half profit to jump more than 50 percent. China South Locomotive , the
country's biggest train maker, rose a further 7.03 percent to 3.96 yuan after
gaining 7.25 percent on Tuesday and jumping 58 percent from its initial public
offer price on Monday as it listed.
Power stocks underperformed, apparently on disappointment with the size of a
0.02 yuan per kilowatt hour tariff hike announced for thermal plants. Huaneng
Power International, China's top electricity provider, rose 3.76 percent to
7.72 yuan. Sundiro shot up 10 percent to 3.83 yuan after saying senior
management would buy shares in the company.
