Chinese market stages 'rust belt' rebound

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Last updated at: (Beijing Time) Thursday, October 09, 2003

Chinese market stages 'rust belt' rebound

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China's shares managed a minor rebound Wednesday after a week's break, backed by a surge in counters of companies based in the country's northeastern "rust belt" ahead of a key gathering of the Central Committee of the Communist Party of China, brokers said.

The benchmark Shanghai composite index, grouping hard-currency B shares for foreigners and yuan-denominated A shares, closed up 0.33 per cent at 1,371.685 points. China's markets closed from October 1-7 for the National Day weeklong holiday.

Communist leaders will hold a meeting from October 11 to 14 to discuss the economy, and policies to revitalize traditional industry based in the northeast should figure high on the agenda, State media has reported.

"Buoyed by expectations of policy support for the northeastern provinces, companies in the region have been very active recently and that phenomenon is likely to persist for a while," said analyst Chen Huiqin at Huatai Securities.

Companies based in the northeastern provinces of Jilin, Liaoning and Heilongjiang - the so-called rust belt of China - topped yesterday's gainers' list.

Jilin-based drug maker Changchun High & New Technology Industries (Group) Inc was the Shenzhen's market's star performer, surging its 10 per cent daily limit to 7.11 yuan (86 US cents).

Chemical fibre maker Liaoyuan Deheng Co Ltd topped Shanghai's gainers, closing up 9.56 per cent at 6.76 yuan (82 US cents).

Despite yesterday's rise, sentiment was wary as the Shanghai composite index hovered around nine-month lows after a market slump propelled by a shortage of funds, the result of a slew of stock offers and a government tightening of bank lending.

The Shanghai composite index has shed 16 per cent since mid-April, versus a 37 per cent rally in neighbouring Hong Kong over that period.

"There was nothing exciting today with the exception of some interest in stocks of northeastern companies," said analyst Di Bin at Merchants Securities. "Most investors kept to the sidelines, waiting for fresh leads."

Many analysts believed the Shanghai index could test a year's low of 1,311.684 points set on January 6 within weeks, barring announcements of major policy support for the market.

The Shanghai B-share index edged up 0.95 per cent to 100.060 points, while its Shenzhen counterpart gained 2.6 per cent to 233.41.

On the foreign exchange market, China's yuan ended one notch weaker versus the US dollar at 8.2771 yesterday, at the stronger end of its managed trading range.

The yuan moves in a band of 8.2760 to 8.2800 enforced by the central bank.

Turnover rose to US$600 million from US$490 million on September 30. The yuan weakened to 7.5505 against 100 Japanese yen from 7.4587 and softened versus the euro to 9.7428 from 9.6213.

In the futures market, Shanghai copper futures racked up fresh contract highs yesterday in active trading, as steep gains on the London market spurred buying after a week-long break, traders said.

Shanghai's most active February contract gained 420 yuan (US$50.72) to 18,900 yuan (US$2,283) a ton, while most others ended up 380 yuan (US$45.89) to 460 yuan (US$55.56). Combined volume soared to 104,150 lots from a light 32,724 lots recorded on September 30.

The Shanghai Futures Exchange was closed from October 1 to 7, as well.

"A strong showing on the London Metal Exchange during the week-long holiday stimulated buying after trade resumed," said a Shanghai-based trader.

LME three-month copper surged to a 33-month high, closing up US$23 to US$1,854 at Tuesday's close, due to strong fund buying, traders said.(China Daily news)

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