Blue Chips Lead Rally on China's Stock Market

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Last updated at: (Beijing Time) Wednesday, April 16, 2003

Blue Chips Lead Rally on China's Stock Market

China's stock market has experienced a sustained rally and brisk trading over the past five trading days, as investors enthusiastically go after low-priced blue chips.

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China's stock market has experienced a sustained rally and brisk trading over the past five trading days, as investors enthusiastically go after low-priced blue chips.

Since Apr. 9, the composite index on the Shanghai Stock Exchange and the component index on the Shenzhen Stock Exchange have both risen by more than seven percent. Combined daily transactions of China's two bourses averaged 37.9 billion yuan (4.57 billion US dollars).

The so-called "low-priced blue chips", stocks of the automotive, financial, iron and steel and energy sectors that are closely linked to the national economy and the people's livelihoods, were once spurned by mainstream investors who favored low-capitalization and hi-tech stocks, even though their prices had risen well above their actual value.

As the bubbles burst, however, the merits of low-priced blue chips, including stable yields, less fluctuation and improving fluidity as more big institutional investors arrive, have come to be recognized and these stocks have become much sought after.

Shares in Lingyuan Iron and Steel Co., for example, experienceda 62 percent gain in the previous seven trading days thanks to a significant profit growth.

For the same reason, China Unicom and Baoshan Iron and Steel have also seen remarkable gains in stock prices.

Of the seven stocks that have experienced eight consecutive days of rally on the Shanghai Stock Exchange so far, six belong tothe blue-chips.

"This shows the mentality of investors has changed. They now value business growth, good profits and returns on stocks," said Doctor Li Jie, of Everbright Securities Research Institute.

"The rise of the blue-chip stocks signifies investors have become more rational rather than speculative. It's also a sign that China's securities market is gradually maturing," said Li.

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