Stock market surges to new high amid economic revival

By Zhou Yan (China Daily)
Updated: 2009-08-04 08:57

SHANGHAI: China's benchmark stock index -- led by steel and nonferrous heavyweights -- closed at a new, 14-month high Monday, due to manufacturing data that signals an economic revival.

The Shanghai Composite Index rose 1.48 percent, or 50.53 points, to 3462.59 -more than double last year's low in November. The smaller Shenzhen Component Index ended up 1.36 percent, or 186.27 points, at 13856.99. The combined turnover on the two bourses was a 6.6 percent increase from last Friday, to 358.9 billion yuan ($52.5 billion).

The lead indicator has gained 6 percent in three consecutive trading days, erasing a drop of 5 percent on July 29, when concerns about possible credit-tightening triggered a sell-off.

And an investment manager said he did not foresee any significant policy change due to the market surge.

"A sudden and widespread tightening monetary policy is highly unlikely, as the economic recovery is still fragile," said Zhang Zhaowei, with Guojin Wealth Management Center. "But the authorities may increase the share supply by accelerating the pace of new listings to ease the overheated stock market."

A survey by brokerage firm CLSA released Monday showed that the China Purchasing Managers' Index (PMI), which tracks manufacturing activities, is expected to show an expansion for July, to a one-year high of 52.8, a firm indicator of economic recovery.

The surge in the mainland stock market has inspired a rally in other Asian bourses.

The Morgan Stanley Capital International index of Asia-Pacific stocks outside Japan increased 0.8 percent, to a new high since early last September. The regional index has risen about 60 percent since early this March, outpacing the gains of 46 percent by the Standard & Poor's 500.

In China, sectors in coal, nonferrous and shipping gained on active manufacturing activities, while bank and property shares lost ground. Three steel makers rose to their daily caps of around 10 percent.

"The central government's consistent, loose monetary policy to strengthen the still-weak economic recovery will contribute to a continuing rally in domestic stocks," said Mao Nan, a senior analyst with Orient Securities.

Agencies contributed to the story