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Chinese share prices rise sharply with turnover increase
24/7/2007 10:11

Chinese share prices rose sharply yesterday with increased turnover, shrugging off an interest rate hike announced by the government last week to cool the economy.

The benchmark Shanghai Composite Index, which covers both A and B shares listed on the Shanghai Stock Exchange, jumped 3.81 percent, or 154.51 points, to 4,213.36 points.

The Shenzhen Component Index on the country's smaller Shenzhen Stock Exchange gained 5.38 percent, or 721.3 points, to 14,139.27 points.

The Hushen 300 Index reflecting the performance of China's two stock exchanges closed at 4,156.72 points, up 4.65 percent from the previous close.

Two measures to soak up excess liquidity were announced after the market closed on Friday. The People's Bank of China said it was raising the benchmark one-year lending and deposit rates by 0.27 percentage points.

The government also announced a reduction in the withholding tax on interest income from 20 to five percent.

The combined turnover of the two bourses expanded to 235.7 billion yuan (31 billion U.S. dollars), following 161.1 billion yuan last Friday and 96.9 billion yuan last Thursday.

Analysts believe the influence of the measures on capital flow would be limited, as deposit interest rates still lagged behind the inflation rate. In addition, investor confidence had largely recovered as the long-anticipated negative policies had finally come out.

"The market has certainly entered a rising stage. Share prices will hit a record sooner or later in the coming months, and the spotlight will radiate from finance, property to other sectors," said an analyst with Shenyin Wanguo Securities.

The best performers on Monday were auto manufacturers and iron and steel producers, triggered by reports that profits of major state-owned automobile companies soared more than 60 percent from January to May.

Led by major producers of Baosteel and Angang Steel, the entire iron and steel sector almost soared to its ten percent daily up limit.

The stocks of four automakers, namely Zhongtong Bus Holding, FAW Car, Tianjin FAW Xiali Automobile and Changchun FAW-Sihuan Automobile, rose to their ten-percent daily up limit, followed by other automakers rising more than five percent.

Large banks and property developers continued to build on recent gains amid strong earnings outlooks.

The Industrial and Commercial Bank of China, the nation's largest lender, climbed 2.68 percent to close at 5.75 yuan per share, and the Bank of China rose 2.27 percent to 5.41 yuan per share.

The major property developer Wanke A shares rose 2.81 percent to 26.36 yuan per share.



Xinhua