The soaring stock market pushed the Shanghai Composite Index to
a new record yesterday as trading resumed after the labor-day
break.
The benchmark indicator surged 108.7 points, or 2.8 percent, to
close at 3,950, with 795 out of 907 stocks closing above their
opening price. Turnover on the Shanghai exchange reached 205.2
billion yuan, the largest amount ever.
The indicator has increased 47.6 percent this year pushed by the
large inflow of funds, analysts said.
The surge yesterday was partially influenced by strong
performances of other world markets and company profit growth in
the first quarter of this year, according to analysts.
"People are investing with enthusiasm," said Chen Wenzhao, an
analyst at Changjiang Securities. "China's fine economic
environment has also contributed to the strong performance of
listed companies."
Real estate companies received a boost in trading yesterday.
Vanke surged to its daily allowable limits to close at 19.89 yuan.
Shares of COFCO Property Group increased 10 percent to close at 24
yuan, while Shanghai Lujiazui jumped 9 percent.
Companies in the coal, oil refinery and transportation sectors
all did well yesterday.
The interest rate adjustment and bank reserve ratio hike appear
to have had little effect on investors, analysts said. Attention is
now focused on government administrative measures that are expected
to be introduced to cool what is seen as an overheated market.
"We expect the government to use administrative measures to
influence the A share market over the coming months," said Jonathan
Anderson, chief economist of UBS Asia.
However, Zhang Yidong at Industrial Securities disagreed. "The
rising frequency of the interest rate hike will finally have an
impact on the stock market, and China is unwilling to adopt an
administrative measure to intervene in free market reallocation,"
he said.
Central bank Governor Zhou Xiaochuan said that the bubble in the
stock market was a concern and that he was monitoring CPI, PPI and
asset prices.
"The stock market will possibly have large fluctuation beginning
from the middle of May because of the expectation of the
government's tightening policy," Zhang said.
(China Daily May 9, 2007)