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Stock index up 5%

By Jin Jing (China Daily)
Updated: 2008-06-19 11:19

The mainland stock market rebounded 5.24 percent yesterday, the largest one-day rise since April, as oil companies surged triggered by speculation that the government may raise fuel prices.

The benchmark Shanghai Composite Index jumped 146.37 points to close at 2941.12, with 844 out of 912 stocks closing higher. The Shenzhen Component Index surged 5.02 percent to close at 9903.14.

The turnover on the two bourses rose 52 percent to 102.2 billion yuan ($14.85 billion), reflecting a slight recovery of investor sentiment. The total capitalization rose 5 percent to 19 trillion yuan.

Jing Ulrich, chairman of JPMorgan Securities China Equities, yesterday said the surge came amid mounting expectations that the government will intervene with fresh measures to support the market.

"Some investors are also starting to see value in companies trading at reasonable prices," said Ulrich.

Shares of PetroChina, which accounts for over 16 percent of the total market capitalization, surged 5.58 percent to 16.09 yuan, and Sinopec soared 9.97 percent to close at 13.01 yuan.

"More and more Asian countries have started cutting oil subsidies to rebalance the demand-supply picture, and China is likely to follow suit," said Xue Lan, head of Citi Investment Research China, in a report.

Analysts are widely expecting the government to raise gasoline and diesel prices, which will help ease the burden on the country's finances and lower demand for oil.

Zhang Xiaoqiang, vice-minister of the National Development and Reform Commission, was reported as saying on Tuesday that "the government will choose a suitable time for price adjustment".

The promise of Sany Heavy Industry Co Ltd's major shareholders not to sell any newly tradable shares within two years unless the market price exceeds 55.76 yuan, also boosted investor sentiment.

"The assurance wiped out investor worries about large-scale sales by major shareholders after their non-tradable holdings become tradable," said Zhu Haibin, an analyst at Essence Securities. Sany shares surged 10 percent to close at 30.67 yuan yesterday.

The Shanghai Composite Index has plunged 51.7 percent from the highest of 6,092 points last October. As uncertainties still hang over the Chinese economy, analysts said yesterday's rebound is no way a sign of regaining its verve.

But Zhu said low-priced large caps are still worth buying. Following the correction, the premium of A shares over H shares has narrowed considerably, with some large-cap A-share companies now trading at a discount to their H-share counterparts.