Market edges up led by oil shares

By Jin Jing (China Daily)
Updated: 2008-06-17 07:31

SHANGHAI: Following the 13.8 percent plunge last week, the mainland stock market yesterday recovered slightly, by 0.18 percent, led by oil companies.

The benchmark Shanghai Composite Index climbed 5.3 points to close at 2874.1, with 668 out of 912 stocks closing lower. The Shenzhen Component Index fell 1.12 percent to close at 9825.27.

The turnover on the two bourses amounted to 65 billion yuan, down 3.4 percent from last Friday. The total capitalization was 18.7 trillion yuan.

Large caps led the rally. PetroChina jumped 2.6 percent and Sinopec surged 6.64 percent. China Life was up 2.58 percent while real estate giant Vanke rose 3.41 percent.

Analysts said the stock market is expected to continue to be volatile in the coming weeks despite the reasonable A-share valuation because of further tightening monetary measures by the government and the possibility of unsatisfactory corporate earnings.

The industrial production growth figure for May released yesterday stood at 16 percent. The lower-than-expected figure reflected the impact of the tightening measures, said analysts.

"The low industrial production indicates the possibility of unsatisfactory profit growth in the future," said Zhu Haibin, an analyst at Essence Securities.

"The tightening measures and the Olympic-related production suspension or restrictions are likely to maintain a downward pressure on industrial production growth in the coming months," Liang Hong, an economist from Goldman Sachs, said in a report.

In addition, the growth of M2, a measure of money supply, for May surpassed that of M1 for the first time in 18 months, showing people are increasingly capitalizing their stocks and real estate holdings into bank deposits.

But the latest report from Credit Suisse said A-share companies are now worth investing following the sharp drop in the market last week.

"For investors with a shorter investment horizon, like three to six months, the short-term trough of the market has probably been reached, and there is a genuine possibility for a 20 to 30 percent rebound," said Vincent Chan, a research analyst from Credit Suisse, in the report.

"For long-term investors looking at a time horizon of two to three years, we advise focusing on individual sectors and stocks. Mass consumption is still the sector with the best secular outlook," Chan added.

Jing Ulrich, chairman of JPMorgan Securities China Equities, said: "With May's export figure surprisingly on the upside, domestic demand strong, and high levels of inward investment, it is clear the economic growth picture is essentially sound.

"Investors are waiting for the picture to become clearer, and will monitor news flow on inflation, monetary policy and energy price controls. Expectations will mount for fresh government measures to stabilize the market in the run-up to the Olympics."

(China Daily 06/17/2008 page13)