Equities rebound from 14-month low

Updated: 2011-09-21 07:48

By Irene Shen (China Daily)

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SHANGHAI - Stocks on the Chinese mainland rose on Sept 20 from a 14-month low, as investors speculated that recent declines were overdone.

The benchmark Shanghai Composite Index added 0.4 percent to 2,447.76, rising from its lowest level since July 16, 2010. The CSI 300 Index gained 0.4 percent to 2,689.84.

"Recent declines were excessive, given valuation levels," said Zhang Han, a strategist at Guotai Junan Securities Co in Shanghai. "The A-share market is near its bottom for the year."

The Shanghai index has slumped 13 percent in 2011, extending last year's 14 percent plunge, as the government increased measures to cool inflation that's at an almost three-year high.

Stocks on the measure trade at 11.3 times estimated profit, after falling to the lowest level on Sept 19, according to weekly data compiled by Bloomberg and dating back to January 2006.

Stocks have also declined on speculation that Europe's debt crisis is widening. Italy's debt rating was downgraded by Standard & Poor's on concern weakening economic growth and a "fragile" government means the nation won't be able to reduce the eurozone's second-largest debt burden.

Italy follows Spain, Ireland, Portugal, Cyprus and Greece as eurozone countries having their credit ratings cut this year.

PetroChina Co, China's largest oil producer, added 0.6 percent to 9.63 yuan ($1.50), after closing on Monday at its lowest level since the company went public in 2007.

China Construction Bank Corp, the nation's second-biggest lender, climbed 0.2 percent to 4.48 yuan. The stock has tumbled 15 percent since this year's peak on April 18.

The mainland may increase investments as possible stimulus plans if the economy slows "sharply", Michael Pettis, chief strategist at Guosen Securities Co, said in an interview with Bloomberg Television on Sept 20.

Developers declined. Gemdale Corp lost 1.6 percent to 5.56 yuan, the lowest close since May 5, 2009. China Vanke Co, the mainland's largest developer by market value, sank 0.8 percent to 7.72 yuan. Poly Real Estate Group Co dropped 0.9 percent to 10.18 yuan, its lowest close since June 17.

The property market is under "double pressure" as developers are faced with low transactions and high inventory levels during September and October, their traditional busiest months for sales, the Shanghai Securities News reported, citing China Index Academy figures.

Some mainland cities may see home prices decline as much as 15 percent, the Hong Kong Economic Times reported, citing SRE Group Ltd Chairman Shi Jian.

Mainland stocks may weaken further on the prospect of more IPOs, according to Manop Sangiambut, CLSA Asia-Pacific Markets' head of A-share research.

Bloomberg News