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Measures boost market

By Zhou Yan (China Daily)
Updated: 2008-09-23 09:37

Strong official measures to stabilize the beleaguered stock market last week, amid the US government's $700 billion financial bailout plan, have produced stunning results.

Following last Friday's surge, the Shanghai Composite Index gained 7.77 percent yesterday, or 161.32 points, to close at 2236.41, with gainers outnumbering losers by 903 to 29. The Shenzhen Component Index rose 4.4 percent to 7469.07.

The turnover on the two bourses totaled 165.8 billion yuan, more than double last Friday's trading.

Extending the gains on Friday, when not a single mainland stock fell, bank and securities firms led yesterday's rally. Shares of all 24 such companies rose.

China's three major commercial lenders, whose shares were allowed to be purchased on the open trade by an announcement by Central Huijin last Thursday, rose to their daily limits yesterday.

Industrial and Commercial Bank of China gained 10.05 percent to 4.16 yuan, Bank of China climbed 10.12 percent to close at 3.70 yuan, while China Construction Bank soared 10.02 percent to 4.61 yuan.

In addition to the rescue move, analysts said yesterday's surge was in response to the US bailout plan proposed over the weekend.

The US government announced its largest ever bank rescue plan since the Great Depression in the 1930s with a $700 billion package on Sunday, purchasing toxic mortgage debt from financial firms in a bid to lift investor sentiment.

The proposal also boosted shares in Chinese financial companies, which closely watched the unfolding crisis on Wall Street, said Zhang Fan, an analyst with Tebon Securities Co Ltd.

To bolster the stock market, the Chinese securities regulator on Sunday released a draft to simplify procedures for stock buyback in open trade by canceling the rule requiring listed companies to seek the regulator's approval to repurchase their own shares.

"This move contributed to yesterday's surge, but it's a technical reform rather than a systemic one and will therefore not give the market strong stimulus," said Zhang. He added that this radical rebound will be followed by a pullback in the coming sessions when the main index reaches 2245 points.