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China market starts year on high
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08:37, February 03, 2009

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The mainland stock market closed higher on the first trading day after a seven-day Lunar New Year break, boosted by significant growth in new loans.

The benchmark Shanghai Composite Index rose 1.06 percent, or 21.03 points, to finish at 2011.68 yesterday, with advanced stocks outnumbering losers by 841 to 47.

The smaller Shenzhen Component Index advanced 1.03 percent to end at 7087.61 points.

Chinese Premier Wen Jiabao said on Jan 28 at the World Economic Forum in Davos, Switzerland, that domestic commercial banks reached a record monthly growth in new loans in the first 20 days of January to 900 billion yuan.

"The rapid increase in bank lending indicates a more sufficient liquidity in the market arising from the massive economic stimulus package before, which helps lift the spirit of investors with optimistic expectations ahead," said Zhong Hua, an analyst with Changjiang Securities.

The tepid performance of global stock markets during the New Year holiday also contributed to yesterday's advancement, analysts said.

The agriculture sector led the rally, with all shares closing higher yesterday on the release of the central government's first policy document of 2009 last Sunday, which highlights the significance of rural areas and agriculture this year as they face the hardest challenges of the last decade.

"We forecast shares in this sector will have persistent momentum to rise in the long-term," Zhong said.

Gansu Yasheng Industrial, an agricultural developing and processing company, jumped the 10 percent daily limit to 3.74 yuan yesterday.

But blue chips underperformed the major index. Sinopec and its smaller rival China National Petroleum, the country's two major oil refiners, dropped 1.39 percent and 0.19 percent respectively yesterday.

The outlook for corporate earnings remains gloomy, however, and more institutional investors have expressed concerns about it.

According to a recent survey of 129 fund managers conducted by investment consulting firm Investoday, the average profit growth rate of listed companies over the coming 12 months is expected to decline 14.6 percent, the lowest figure since 2004.

"The performance of the stock market ahead will heavily depend on the first-quarter financial reports amid the key macroeconomic data," analyst Wu Feng from TX Investment Consulting noted, adding that the leading indicator will hover around 2020 points over February.

Source: China Daily



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