Profits, optimism drive Chinese stock market to 6-month high

10:50, October 26, 2010      

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Mainland stocks gained, driving the benchmark index to a six-month high after companies from Gree Electric Appliances Inc to Yanzhou Coal Mining Co reported higher profit and rising commodities boosted materials producers.

Gree Electric surged to a record, pacing gains among appliance makers. Yanzhou Coal jumped by the 10 percent daily limit after net income more than tripled. Jiangxi Copper Co gained as the dollar weakened and commodity prices rose after Group of 20 finance leaders said they will limit currency intervention. Software developer Neusoft Corp led an advance by technology stocks after the government said it will start a cloud computing trial.

"We are in a bull market as the market is turning more optimistic about corporate earnings and macroeconomic fundamentals amid the backdrop of abundant liquidity," said Zhang Ling, a fund manager at Shanghai River Fund Management Co.

The Shanghai Composite Index advanced 2.57 percent, to 3051.42 on Monday, set for the highest close since April 21. The CSI 300 Index climbed 3.03 percent to 3481.08 on Monday.

China's focus on both income growth and redistribution in its next five-year economic plan is bullish for the nation's consumer stocks, according to China International Capital Corp.

"This emerging affluent mass is rapidly becoming an important social-economic group, and its consumption preference and aspirations are likely to determine the direction of future consumption to a large extent," Hao Hong, a Beijing-based global equity strategist, wrote in a report. "This secular trend, with increasing policy support from the top, is bullish for consumer sectors."

Credit Suisse Group AG increased its 12-month forecasts for the MSCI China Index, Hang Seng China Enterprises Index and Shanghai A-Share Index by 14 to 27 percent on stronger-than-expected earnings growth.

Still, mainland stocks are not likely to repeat the "bull-market run" that occurred during 2004-2008, according to the report by Vincent Chan and Peggy Chan at Credit Suisse.

Source: China Daily


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