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English>>China Business

Local stock markets tap brakes after gains on PMI

By Yu Xi (Global Times)

08:43, November 05, 2012

Chinese stock markets ended with slight gains Friday, as the positive market sentiment which emerged Thursday following an improvement in manufacturing data spilled over into a second trading day.

The Shanghai Composite Index finished trading at 2,117.05 points Friday, up 12.62 points, or 0.60 percent on the day; while the Shenzhen Component Index closed at 8,679.68 points after climbing 16.54 points, or 0.19 percent.

Both markets finished last Monday with losses due to a carryover of weak market sentiment from the previous week as well as drops in home appliance, rare earth and financial stocks. Strong performances in the heavily weighted real estate and steel sectors helped the mainland markets record modest victories Tuesday. The gains extended into Wednesday as rail infrastructure stocks soared on news that the Ministry of Finance was researching methods to provide subsidies to the rail transportation industry.

A-shares got a lift Thursday from the release of China's official manufacturing purchasing managers' index (PMI) for October from the National Bureau of Statistics (NBS). The closely-watched gauge of factory activity printed with a headline reading of 50.2, breaching the 50 point mark which separates expansion from contraction for the first time since July and stoking speculations among investors that the domestic economy was pulling out of its recent slowdown.

The euphoria surrounding the strengthening PMI had died down somewhat by Friday, with gains and trading volume moderating from the previous day. The combined turnover of the Shanghai Composite and the Shenzhen Component retreated to 105.46 billion yuan ($16.74 billion), down from Thursday's total of 119.2 billion yuan. Real estate, construction, entertainment and media stocks ranked among Friday's best performers; while the gold, rare earth and touch screen sectors led the market in losses.

Shares of Chinese auto parts maker Zhejiang Shibao Co Ltd jumped by more than 600 percent to close at 18.75 yuan in its Shenzhen IPO Friday.

In a broadly positive day for listed property developers, both Beih-property Co and Guangzhou Pearl River Industrial Development Co climbed to the daily limit Friday to close at 4.58 yuan and 10.51 yuan respectively.

On the downside, gold shares tumbled roundly. Shandong Humon Smelting Co dived 3.12 percent to 21.40 yuan on the day. Lao Feng Xiang Co declined 1.68 percent to 20.48 yuan.

Although mainland stocks may have finished trading on a high note last week, analysts urged investors to maintain a cautious outlook toward equities over the near term. With many predicting manufacturing activity to continue expanding throughout the remainder of the year, Chinese financial authorities could decide to hold off on loosening monetary policies further in the coming months, according to analysts.

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