Economy

Markets

Industries

Insights

Reports

Events

Stocks jump on first trading day of 2009

By Zhou Yan (China Daily)
Updated: 2009-01-06 07:37

A man gestures in front of an electronic board displaying stock prices at a brokerage house in Shanghai January 5, 2009. Agencies

The mainland stock market began the New Year with a broad rally yesterday, led by the policy-driven auto and steel sectors and a rebound on bourses across the world.

The benchmark Shanghai Composite Index rose 3.29 percent, or 59.91 points, to end at 1880.72 on the first trading day of 2009 after eight straight days of losses. The rise in stocks was almost overall, with advancing stocks outnumbering losers 864:33.

The smaller Shenzhen Component Index rose 2.3 percent to 6634.88 points. And the combined turnover on the two bourses reached 70.4 billion yuan ($10.29 billion), up 30.6 percent over the last trading day on Dec 31.

The mainland market rally came on the heels of the good showing of the US stock market. The Dow Jones industrial average rose 2.94 percent to end the day on 9034.21 on Friday, the first trading day of the New Year.

In rest of Asia, Tokyo's Nikkei 225 rose 183.56 points, or 2.1 percent, yesterday to end at 9,043.12, its first 9,000-plus-point finish since Nov 10.

Hong Kong's Hang Seng Index climbed 3.5 percent to 15,563.31.

And Singapore's stocks jumped 4.5 percent, with stock exchanges in India, South Korea, Malaysia and Thailand also climbing up.

European bourses followed their Asian counterparts to end the day higher, though their gains were smaller. Britain's FTSE 100 rose 0.4 percent, Germany's DAX advanced 0.8 percent and France's CAC 40 added 0.4 percent.

"US stock markets are partly absorbing the liquidity provided by the Federal Reserve to ward off the economic meltdown," said Wu Feng, a TX Investment Consulting analyst. But, he said, the turnaround does not signal an economic recovery.

The January effect - a rise in the index in the first week of the month because of synchronized reinvestments by people - has worked this year, too, Wu said.

The rise in mainland stocks can also be attributed to the central government's announcement that it is working on two major plans to boost domestic demand and bolster 10 key sectors.

The State Council, the country's Cabinet, has already announced plans to support the steel and automobile industries. Adjustments and improvements in other sectors are under way, Premier Wen Jiabao said on his visit to Qingdao, Shandong province, over the weekend.

The news sent China's largest steel-maker Baosteel's shares soaring 7.54 percent to close at 4.99 yuan. Smaller rival Ansteel's shares jumped 8.2 percent to end at 7.52 yuan.

In the automobile sector, shares of Dongfeng Motor, China's third-largest auto maker, rose 4.44 percent to 3.06 yuan yesterday.

"Policy-driven sectors will continue to be the major contributors to the rise of the index in the near- and mid-term," said Zhang Fan, an analyst with Shanghai-based Tebon Securities.

But yesterday's rally was also the result of a technical rebound after eight days of losses, he said.

Wu, too, does not see this as real recovery. "Real recovery will come when the impact of the $586-billion stimulus package is felt on the wider economy," he said.

Jonathan Anderson, a Hong Kong-based UBS economist, said that "though the domestic demand data continue to weaken even on a sequential basis, we still see good reason to look for stabilization and recovery in the near future in China".

Since financial markets have been stable during the past six weeks, and economic growth is unlikely to fall further than the fourth quarter, the first half of this year could well be the turning point, he said.