SHANGHAI - China's main stock index climbed above 3,000 points for the first
time on Friday, but then pulled well back as heavy profit-taking hit expensive
The Shanghai Composite Index surged to a new peak of 3,036.346 in the
afternoon, but closed just 0.18 percent up at a record high finish of 2,998.474.
Turnover in Shanghai A shares rose to 93.2 billion yuan ($12 billion), its
highest level this month, from 86.1 billion on Thursday. A total of 526 shares
rose while 335 fell.
"After hitting the record high, people became cautious and began to take
profits on the last trading day before the holidays," said Guo Yanling, analyst
at Shanghai Securities. The market will be closed throughout next week for
Chinese New Year.
Guo said the market's underlying mood remained bullish, supported by strong
corporate earnings as the 2006 reporting season picked up.
The index soared 9.8 percent this week in a spectacular rebound that took it
up 18 percent from a February 6 low of 2,541, hit after a 15 percent pull-back
from January's peak.
Many traders, however, believe the index's failure to break decisively above
3,000 on Friday confirmed that strong resistance remained at the that level.
An extended rally after Chinese New Year is not inevitable and the market may
need positive policy cues from the National People's Congress in Beijing, which
meets in the first half of March, to rise further, some said.
After the market closed on Friday, the central bank said it was raising bank
reserve requirements by a further 0.5 percentage point. Reserve ratio rises have
little impact on stock market liquidity or sentiment, but the hike may prompt
some short-term selling after the holidays.
Ping An Insurance is expected to list in Shanghai on March 1 after drawing
huge IPO demand and the stock is likely to have a strong debut, which could help
push the market higher.
But state media have said an investigation into the illicit use of bank loans
to buy stocks will gather pace after the holidays, and any sign of official
displeasure with the market could easily dampen it.
With the index around 3,000 points on Friday, investors' attention refocused
on the high valuations of large caps, particularly financials.
Industrial & Commercial Bank of China slipped 0.58 percent to 5.14 yuan,
while oil refiner Sinopec fell 1.56 percent to 9.49 yuan.
Many smaller stocks continued to draw active buying in response to news and
Baotou Steel surged its 10 percent daily limit to an all-time high of 4.66
yuan, breaking its previous record intra-day high of 4.34 yuan, on continued
anticipation of its parent company's eventual listing. The Shanghai Securities
News carried an analysis of the plan on Friday.
Shanghai Auto rose the 10 percent limit for the second straight day to a
record high of 12.83 yuan, amid general strength in the auto sector after good
Sichuan Changhong Electric Appliance Co. climbed 3.75 percent to 5.54 yuan
after it reported a 7 percent rise in net profit last year, thanks to good
growth in sales of newly introduced product lines. Total sales rose to a record.
($1 = 7.74 yuan)